- The problem with current auto insurance
- How DePIN auto insurance is a game changer
- The future is in DePIN
The CEO of Minima, one of the representatives of the new DePIN trend, has found another real-life application of blockchain. He believes that auto insurers are taking a blanket approach to premium pricing, disadvantaging drivers even with excellent driving histories. According to Hugo Feiler, DePIN auto insurance can help individualize policies while keeping data secure.
Any novice driver gets a shock when they see the amount they have to pay for insurance. Insurance companies categorize all novices as high risk, which is not always fair. It would make more sense to assess the quality of a particular driver rather than an entire cohort.
Indeed, it seems unfair to generalize and consider an entire group of drivers dangerous because of grouping factors. Sloppy drivers exist in every age group and category, and insurance premiums should reflect individual driving skills, not the skills of the group to which a person belongs. DePIN would help focus on the outcomes of individual drivers rather than the group they belong to.
The problem with current auto insurance
The current auto insurance industry builds risk profiles based on generalizations about the driving behavior of all drivers behind the wheel. This approach often penalizes members of an entire cohort based on the actions of a few individuals, resulting in disproportionately high insurance prices.
In the U.S., for example, the cost of insurance rose 25 percent in 2023 after a 50 percent increase the year before, but insurers still say they spend more on payouts than they receive in premiums, and this affects young drivers the most. In Russia, policy costs have been rising since 2022 and are forecast to jump upwards to 30% in 2024.
This approach is inherently unfair because it does not take into account individual driving behavior and circumstances. For example, a young driver who adheres to safe driving rules and has no history of accidents is still categorized as high risk simply because of age. Lack of personalization penalizes good drivers and discourages safe driving because they don’t see the direct benefit of their responsible behavior.
How DePIN auto insurance is a game changer
The DePIN concept aims to create a decentralized infrastructure that empowers end users by providing more affordable services. The unique use case of DePIN is that it allows each member of the ecosystem to collect data and transmit it to the network and get paid for their data.
Utilizing data related to individual users, but keeping it private through blockchain and DePIN data sharing, allows insurers to develop more accurate driving risk assessments for specific drivers. Unlike traditional methods that rely on general assumptions, DePIN allows for a detailed understanding of individual driver behavior.
At the heart of this revolution is the “DePIN Data Logger,” a state-of-the-art device that can be attached to a vehicle and receive data directly from the vehicle’s sensors. This data logger captures multiple metrics such as speed, reaction time to stop, and others that can help companies analyze overall driver behavior.
The DePIN data logger is customized to convert vehicle insurance, including a pay-as-you-drive model. Drivers can securely and anonymously log their data using a unique personal identifier that provides access to share their data. This system ensures that the necessary data is collected for risk assessment and insurance calculation without compromising the identity of the driver or specific details of the journey.
By collecting detailed driving data, insurers can gain detailed insight into driver behavior. This data-driven method moves away from broad generalizations and offers a fairer solution for determining insurance premiums.
DePIN’s emphasis on privacy means that while exhaustive data is used to improve insurance accuracy, drivers’ personal information remains safe. Drivers can enjoy the benefits of personalized insurance without fear of their movements being tracked or their data being misused. Additionally, by signing up, drivers can get paid for data they choose to share with third-party vendors for uses beyond insurance, such as car manufacturers, mechanics, and parts suppliers.
The future is in DePIN
The potential benefits of a data-driven approach are supported by various studies and hard data: a McKinsey & Company report emphasizes that telematics-based insurance products can lead to more accurate pricing, lower claims costs and increased customer satisfaction.
In addition, data from the European Commission indicates that incorporating telematics into vehicle insurance can reduce accident rates by up to 20% as drivers become more aware of their driving habits and adjust their behavior accordingly. These findings highlight the potential for DePIN to create a fairer and more efficient auto insurance system.
As the DePIN concept continues to gain momentum, it is hoped that insurers will utilize this technology and build on its potential. By doing so, they can create a fairer and more efficient system that rewards safe drivers and reduces the financial burden on those who are unfairly penalized under current models.
