By Hugo Feiler, CEO of Minima
Passing my driving test at 18 gave me a sense of great freedom. But, as I considered buying a car, the thrill was dented by the cost of car insurance. Because I was a new driver, I was seen as high-risk by insurers and my quote was exorbitant. I felt it was unfair to be evaluated as a driver based on the perception of the cohort I belonged to.
It's unfair to generalize and deem an entire group of drivers as dangerous due to grouping factors. Exceptional drivers exist in every age group and category, and insurance fees should reflect individual driving skills, not the driving skills of the group that one belongs to. To ensure fairness, we should focus on how individual drivers perform rather than the group they fall in, and DePIN will help us achieve this.
Although this feeling of injustice didn’t lead me directly to founding a Layer-1 blockchain for DePIN applications, the impact DePIN is already having on the automotive industry inspired me to consider how the concept could be utilised to make car insurance fairer.
The current vehicle insurance industry builds risk profiles based on generalizations about the driving behavior of all drivers. This approach often penalises members of an entire cohort based on the actions of a few, leading to disproportionately high premiums across the board.
The upshot is that motor insurance premiums are rising, even on the cheapest cars. The cost of insurance increased by 25 per cent in 2023, following a 50 per cent hike the year before, yet insurers still claim to be spending more on claims and costs than they’re raking in via premiums, and younger drivers are the most affected by this.
This approach is inherently unfair because it fails to account for individual driving behaviors and circumstances. For example, a young driver who practices safe driving habits and has no history of accidents is still lumped into a high-risk category simply due to age. This lack of personalization penalizes good drivers and discourages safe driving practices, as they see no direct benefit from their responsible behavior.
How can we solve this problem?
DePIN aims to create decentralized infrastructures that empower end-users by providing more affordable services. A unique use case of DePIN is that it enables each participant in an ecosystem to collect and contribute data to the network and be paid for their data. Using data assigned to individual users but preserving their privacy through blockchain cryptography and DePIN data sharing, enables insurers to develop more accurate assessments of driving risk for specific driverss. Unlike traditional methods that rely on broad assumptions, DePIN allows for a nuanced understanding of individual driving behaviours.
A “DePIN Data Logger” can be attached to a car to acquire data directly from a car's sensors. This device captures multiple metrics such as speed, break reaction time and more, that can help companies analyse the overall behaviour of drivers.
The DePIN Data Logger is set to transform vehicle insurance by enabling a “pay-as-you-drive” model. Drivers can securely log their data anonymously, using an unique personal ID, which grants access to sharing their data and pay the insurance at the end of each journey. This system ensures that the necessary data for risk assessment and insurance calculation is collected without compromising the driver's identity or specific journey details.
By collecting detailed driving data, such as speed, braking patterns, and reaction times, insurers can develop a nuanced understanding of drivers’ behavior. This data-driven method moves away from broad generalizations and offers a more equitable solution for determining insurance premiums.
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