The British Insurance Brokers’ Association (Biba) say that motor insurance policies which use “Black Box”  technology has increased fivefold over the past two years with further predictions of 500,000 cars in the UK having a telematics device by the year 2014.
Telematics is becoming viewed as the panacea of the insurance industry. However, it isn’t the telematics technology that provides the insightful information necessary for tailored premiums. Whilst the technology is the enabler, it is the capability to analyse the data on a granular level, and provide objective and accurate measurements of how a driver performs where the true value lies.
Motor insurance policy holders are accustomed to premiums that have been defined by predetermined proxies, whether that be age, gender, location or marital status. Telematics simply allows those proxies to be at worst augmented, and at best radically changed, by a real understanding of exactly what level of risk a driver presents.
Let’s face it: When it comes to insurance policies, competitive pricing will always be the dominating factor. Government initiatives such as graduated licenses, which demand the passage of elapsed time, rather than a demonstration of empirical skill improvement, provide a glimpse of the changing face of the insurance industry. However, a legislative move like this would only postpone newly qualified drivers from gaining valuable driving experience in more challenging driving conditions.
Such limitations simply become another proxy from which insurance brokers can price premiums. Telematics has a part to play here – it is possible to assess exactly how a new driver’s skill improves over the period post qualification, and graduated licences could easily be dependent upon such skill improvement. The whole arena of insurance telematics is based upon the understanding of behaviour. This understanding can provide added value to insurers, the state and associated charities. Whilst the technology enables such a change in the industry, the true value lies in the data set and the interpretation of said data.
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