How to recognise legal variants of usage-based insurance

The theoretical basis of usage-based insurance (UBI) is that drivers with safer driving performance should deserve the insurance premium discount, such that the insurance companies should focus on the actual driving history, location, specific driving method and other considerations, on which the premium should be determined. This is different from traditional commercial auto insurance in China. UBI in China has not started yet, however innovative internet enterprises such as Tainiu are eager to work on the variants similar to UBI. Combined with the current trend, this column will discuss how to legally realise the variants of UBI.

Q: What are the legal relationships that may be involved in the variants of UBI launched by the Internet of Vehicles (IoV) enterprises?

A: The legal relationships that may be involved are:

First, the commercial partnership between the insurance companies and the IoV enterprises. Based on the advantages of collecting drivers’ data from vehicle-mounted smart products, IoV enterprises can select the valued insurance clients for insurance companies through real-time data analysis and help the insurance companies adjust their marketing policies, and formulate the targeted premium rate of auto insurance.

The insurance companies purchase vehicle-mounted smart products for their client, and pay the procurement fees and technical service fees to the IoV enterprises.

Second, the insurance relationship between the insurance companies and the clients of car insurance. The IoV enterprises recommend clients who are willing to purchase the vehicle-mounted smart products, the car owners cover the insurance with the insurance companies directly, and the insurance companies determine whether to underwrite the insurance or not after the assessment, and settle the claims of the car owners after the insured events.

Third, the legal relationship between the IoV enterprises and the car owners. The vehicle-mounted smart products of the IoV enterprises, used by the car owners, collect the mileage, driving situation, car conditions, driving habits and other data with real-time data analysis. These products give timely feedback to car owners and provide early warnings to help reduce accident rates.

The IoV also grants car owners rewards for safe driving, as long as they use the smart products for a certain period during which no accidents occur.

Xia Yibin is a partner at AnJie Law Firm