The motor insurance industry could cut premiums by 40% and knock around £3.6 billion off the nation’s collective insurance premium – and get back into profit - if it adopted current technology to monitor driver behaviour.
Insurance pioneer Johan van der Merwe, who along with other investors acquired pay-how-you-drive insurer Coverbox earlier in 2012, says current car insurance industry price setting and cost control logic belongs in the 1970s – and would simply not be tolerated in any other consumer market.
“All the talk amongst drivers is the cost of car insurance; all the talk amongst insurers is the escalating costs of claims – many of them questionable or fraudulent. But the incidents and circumstances leading to the vast majority of claims are unwitnessed and unmonitored, and rely either upon the honesty of the people involved, or costly investigations for sometimes even low-value claims,” said Johan van der Merwe.
“This is the equivalent of the supermarket chains operating without CCTV or security tags, wondering where the revenues were going, but instead of introducing security and monitoring simply putting up the prices by around 50% to ensure they continue to make a profit - which is what has happened in the car insurance industry in the past two years.
“In essence, everybody is violently agreeing. Telematics is the answer; the technology is available here and now. It is real-time, ongoing monitoring and tracking of driver behaviour, with data beamed back from vehicles to insurers who can be alerted instantly and immediately to unusual or extreme driving events, whether excessive speed past a school or an accident.”
The cost of car accidents to the UK economy is around £20 billion each year - loss of production and uninsured costs such as at fault driver injury. The whole UK motor market is around £9 billion of premium with claims costs of about £7 billion.
Johan Strydom of The Actuarial Consultants said: “Based on published statistics by Co-op Insurance and Insure the Box, the insurance industry generally accepts that telematics insurance products cuts accident rates by around 20%. But given that accidents involving vehicles vary in severity from minor damage to multiple fatality, the consequent reduction in value of claims costs to insurers is in the region of 40%.
“Given that UK private car insurance premiums are running at more than £9 billion a year, this could equate to an annual saving of up to £3.6 billion of insurance premiums to the public if we interpret the Co-op and Insure The Box claims directly rather than a safe driver migration to fairer insurance products.
“Safe driving could well gain a momentum with more and more people changing their driving behaviour: we are effectively introducing individual risk management - for the first time we are getting close to empowering individuals to control their individual insurance costs and this will feed through to national savings.”
Johan van der Merwe added: “You don’t have to look hard to see the effect of driver monitoring: the vast majority of drivers temporarily alter their driving behaviour when they are in the vicinity of speed or safety cameras, or if they see a Police car.
“Telematics – interactive devices developed by world leaders such as Ctrack - enables people’s driving behaviour to be observed and recorded, it helps confirm or interpret driving behaviour and vehicle movement before and during an accident, and it allows insurers to reward drivers – with lowered insurance costs – if they drive in a low-risk environment.”
Coverbox pay-how-you-drive insurance allows drivers to take out comprehensive cover paid for by the mile, with the price per mile varying according to the time of the day or night: off-peak, peak or "super-peak" times, and how the driver drives. All Coverbox policyholders have a personal website enabling them to see precisely how many miles they are driving, and what the cost is. The technology behind Coverbox is based on proven equipment and technology.
|
