By Selim Cavanagh, Vice President Telematics for Wunelli, a LexisNexis Risk Solutions company
A variety of factors have impacted the wider adoption of telematics based policies but a big one, if not the biggest factor, has been the cost of acquiring the driving data that underpins the telematics policy. Then there’s the on-going customer engagement and administration. This has all been a new discovery for insurers and brokers, and those unencumbered with existing legacy systems have been at a distinct advantage. It’s taken a huge leap of faith by the early adopters, and
I think 2017 could prove to be the turning point – both due to a number of key driving forces and the development of telematics technology.
We know the UK Government is keen to explore technology that will help influence driving behaviour – they said so in their Road Safety statement in 2015 – in it they said they would engage with insurers to help support innovation within the motor insurance market so that premiums become more responsive to safer driver behaviour and vehicle choice. We know motor insurance pricing is rising quarter after quarter and will rise for certain when the Insurance Premium Tax goes up to 12% in June 2017. And we know consumer attitudes to behaviour-based insurance and data ownership are changing – particularly amongst the millennial generation. Studies have shown that people are willing to share their data when they can get something in return . Furthermore our own research has found that 78% of motorists think that the price they pay for insurance should be linked to their driving behaviour .
The fact is that while it has taken time, the confidence in telematics is growing – both in the insurance sector, which is now starting to cover the costs associated with UBI propositions and amongst customers.
From a technology perspective, the way data is collected on an individual’s driving behaviour for telematics insurance has expanded in the last few years bringing the cost for acquiring that data down. At the start, this data was solely derived from fixed black box devices. Costs included the physical hard wired box, installing it, gathering the data and the cost required to obtain meaning from the data to ultimately achieve some value from it. We’re now seeing increasingly sophisticated smartphone apps, and this year, a new 12V device will launch which will enable insurers to gather driving behaviour data at around 15 percent of the cost of a hard-wired device and provide the level of accuracy and data quality they need to scale for more drivers on the road.
The 12V device is plugged-into the cigarette-lighter in the car and doubles as a mobile phone charger. This is a real game changer as it means that motorists can gain all of the benefits of having a telematics policy, but don’t have to have a black box fitted to their car, they just plug in and go, taking the device with them if they buy a new car. Of course it also eliminates some of the operational issues insurers have needed to consider.
Given the cost savings for the insurance sector, the bigger potential with this new technology is that insurers may be in a position to reduce insurance premiums which would be a pretty compelling message right now. They will be able to offer all the usual benefits you would expect from a telematics policy such as collision detection so that immediate assistance can be offered and a speedy claims process through greater knowledge of the circumstances of an accident.
Of course one of the most important benefits of telematics supported by the 12V device is that it will deliver accurate driving behaviour data to the insurer so that they can provide feedback to their customer and provide incentives such as discounts or additional services, to improve their road skills and cut their accident risk.
So what are the wider ramifications of this technology? Until now, the vast majority of telematics policies have been targeted at the young driver market who pay the highest premiums but with the fall in the cost of data acquisition, the potential to go beyond this niche market to mass consumer adoption is there for the taking. Wunelli is already working with a number of innovative brokers looking at niche segments outside of the young driver market and with many motorists looking for ways to reduce their motoring costs, interest in telematics based insurance is only going to grow.
It’s no secret that eventually most cars will have the inbuilt ability to collect driving data but with the average age of cars on the road today at 8 years old we’re still some way from this being ‘the norm’. Telematics based insurance has come a long way in the last 9 years - it’s taken time and we still have some way to go before market penetration edges into double figures, but 2017 looks set to be a pivotal year in the move towards mass market take up.
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