Near‐miss telematics in motor insurance

We present a method to integrate telematics data in a pay‐how‐you‐drive insurance pricing scheme that penalizes some near‐miss events. We illustrate our method with a sample of drivers for whom information on near‐miss events and claims frequency records are available. We discuss the implications for motor insurance ratemaking. Our pricing principle is to combine a baseline insurance premium with added extra charges for near‐miss events indicating risky driving (or discounts) that can be updated on a weekly basis. This procedure provides an incentive for safe driving. In our real‐case study illustration, hard‐braking and acceleration events as well as smartphone use while driving increase the cost of insurance.