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Effect of Driving Score on Usage-Based Motor Insurance Risk Classification

Abstract

The study examines the effect of driving score on usage-based motor insurance risk classification, focusing on how measurable driving behaviour influences the classification of policyholders according to their expected level of motor insurance risk. Driving scores are commonly derived from indicators such as acceleration, braking, speed patterns, cornering, and driving consistency. Their use in usage-based insurance provides insurers with additional information for assessing individual driving behaviour and differentiating risks. The study will investigate how variations in driving scores affect the risk classification of motor insurance policyholders. It will examine whether differences in driving scores correspond with differences in claims experience and risk categories. The study will also assess the usefulness of driving scores as an actuarial factor for distinguishing between relatively lower and higher expected motor insurance risks. The analysis will focus on driving scores, driving behaviour, claim frequency, claim severity, expected losses, and risk classification. Statistical and actuarial techniques will be applied to examine the relationship between driving scores and insurance risk outcomes. Different driving score ranges will be compared to determine variations in claims experience and expected risk levels. A quantitative research approach will be adopted for the study. Relevant usage-based motor insurance data containing driving scores, vehicle information, claims experience, and policy records will be analysed using descriptive statistics, correlation analysis, regression techniques, and actuarial risk classification methods. The analysis will determine the extent to which driving scores can explain differences in observed motor insurance risk. The study is expected to reveal that driving scores have a measurable effect on usage-based motor insurance risk classification. Higher driving scores may be associated with safer driving patterns and lower expected claims exposure, while lower scores may correspond with greater risk indicators. The strength of these relationships is expected to vary according to the driving behaviours used in calculating the scores and the quality of the available insurance data. The findings are expected to provide useful information for insurers and actuaries in developing more responsive usage-based risk classification models. The study may support the use of driving behaviour data in improving risk differentiation and estimating expected motor insurance losses. It may also contribute to the development of actuarial models that incorporate objective driving measures alongside traditional insurance rating factors. The study concludes that driving score can serve as an important factor in usage-based motor insurance risk classification. It is therefore recommended that insurers apply reliable driving data and appropriate actuarial and statistical techniques when incorporating driving scores into risk classification models to ensure that identified risk differences are accurately reflected.

Keywords: Driving score, usage-based motor insurance, risk classification, driving behaviour, motor insurance, telematics, claim frequency, claim severity, expected losses, actuarial risk assessment, insurance pricing, driver behaviour, risk rating, usage-based insurance, motor insurance claims.