There are many well-known ways to lower your car insurance bill, from raising your deductible to reducing coverage on older vehicles, or simply comparing rates between providers.
But thanks to the "Internet of things" -- that is, the trend of taking everyday objects and giving them network connectivity -- there's a new, high-tech way you can bring down your cost for car insurance. And though it's becoming more popular by the day, chances are you haven't even heard of it yet.
So you're a good driver? Prove it and save.
It's called usage-based insurance (UBI). More specifically, I'm talking about UBI based on telematics hardware and software. And lucky for early investors, an Internet of Things company called CalAmp Corp. (NASDAQ:CAMP) is paving the way for UBI policies to become more mainstream.
Specifically, CalAmp sells a variety of automotive telematics devices equipped with GPS, accelerometers, and access to your car's onboard diagnostics system. By using CalAmp's UBI solutions, insurance companies can accurately measure not only your vehicle's speed and location, but also detect and analyze hard braking, sharp cornering, and fast acceleration -- or lack thereof.
Long story short, if you opt for a usage-based auto insurance policy, CalAmp can help prove to your insurance company what a wonderful, safe driver you are. And your insurance company, in turn, can comfortably reward you with a lower rate.
In addition, for all you safety conscious folks out there, CalAmp's devices can aid in stolen vehicle tracking and recovery, roadside assistance, crash detection, and the collection of crucial pre- and post-impact data for accident reconstruction.
UBI is still young
According to a study last year from LexisNexis, only 38% of consumers are aware of insurance telematics. And within that group, only 18% have actually signed up for a telematics-based UBI policy. All told, that means such plans currently account for just 2% of all U.S. personal auto insurance policies.
CalAmp's UBI revenue stream is similarly young; Though CalAmp's revenue from insurance products is on track to grow roughly 50% year over year in fiscal 2015, that will still mean less than $12 million in annual sales, or less than 5% of CalAmp's expected fiscal 2015 total.
At the same time, this also means UBI still has plenty of room to grow. In fact, some industry estimates predict within five years, UBI policies could represent a full 20% to 30% of the overall market.
Sure enough, last quarter CalAmp management insisted "We continue to believe usage based insurance can be a major growth driver for CalAmp over the longer term, particularly as we explore various options to add value beyond hardware devices."
To add perspective on that comment, the majority of CalAmp's business in UBI comes through selling their hardware devices to partners, who currently include Himex, Modus, and RAC. These partners then use CalAmp's devices to collect the data for their own comprehensive UBI solutions, and resell those solutions to insurers. But rather than playing such a narrow role in just providing hardware, CalAmp would obviously love to secure more direct, recurring business in this fast-growing market by licensing its own higher-margin UBI software and services along with those devices.
CalAmp has also stated during recent investor conferences that it's "gaining traction" in this emerging market. But given its massive growth potential, you can bet we'll be listening closely for any additional details CalAmp is willing to offer regarding its UBI efforts in the coming quarters.
In the meantime, it might just be worth checking out a few UBI policy providers to see how much you can save.