While insurers have always rated their motor policies based on where the car is kept, the age of the driver and their profession, telematics data is now providing both a new way of verifying this data and further risk criteria for more accurate pricing.
Telematics is simply the transmission and collection of data, which is then aggregated to inform decision-making. When applied to the motor insurance industry, telematics enables driving data to be gathered and transmitted directly from a vehicle on the road for analysis by insurers, who can then adjust their premiums accordingly. This enables careful drivers to benefit from lower premiums based on their actual driving behaviour.
Using a telematics device over a period of time enables a record to be built up of the time of day and distances the car is usually driven, as well as whether the driver speeds and how aggressively they break and accelerate. Such evidence enables insurers to spot safe drivers even amongst traditionally high risk groups, such as younger motorists, and offer lower premiums accordingly.
Based on current data, over 70% of drivers using telematics insurance products actually get a reduction in their premium based on good driving. This shows they are actively changing the way they drive and enjoying the benefits it creates.
Perhaps it is not surprising then that Consumer Intelligence research shows 4% of drivers are already using telematics technology in their vehicles, and nearly one in five motorists will consider taking out policies based on this at their next renewal date.
In the 18 months from June 2012, the number of live telematics policies increased by 61% to 296,000 according to research by the British Insurance Brokers’ Association (BIBA). Furthermore, analysts predict that 2.15m such policies will be in place by 2015.
One reason for this rise in popularity is that, while telematics-based insurance initially relied on black boxes that were expensive to install, the introduction of on-board diagnostic devices and, in particular, smartphone apps has provided insurers with a cost-effective way to offer these policies to the mass market. In the future, apps will lead the way, and we are starting to see this already.
Young drivers in particular are embracing this technology, and are reaping the benefits of doing so. According to BIBA, while telematics-based policies could offer savings of around 25%, some young drivers can save up to £1,000 at the top end.
In conjunction with Wunelli, SSP has created the first whole of market telematics solution, SoteriaDrive , which leads with app technology, but can also support black box or tethered devices. By choosing this product from any of the SSP panel of insurers, drivers will receive a score of between 1 and 100 for every journey they make, as well as periodic feedback on how they can improve their driving. This feedback has been proven to improve driver behaviour as well as provide a regular customer engagement tool for Insurers and Brokers to use.
This positive impact of telematics on people’s driving style will be a major feature of the market, so if firms do not get on board now, they are in danger of losing out to forward-thinking competitors that are already developing their knowledge and infrastructure.
About the Author
SSP is a global provider of technology systems and solutions across the entire insurance industry, using our expertise to enable our customers to transform their business and increase their profitability. SSP provides core technology solutions, distribution and trading capability, advanced analytics and solution delivery. We work with 8 of the top 10 UK insurers, 4 of the top 10 global insurers and over 40% of UK Brokers. Our unique position in the market, including the largest market share of UK e-trading, enables us to provide leading data insight and unrivalled distribution. Our knowledge, talent and technology capabilities deliver innovative results that make us the partner of choice for our customers.
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