While the ever-evolving insurance market and changing customer demands may seem tough challenges for brokers, there are opportunities for them to differentiate themselves, not least in the motor sector.
According to the AA Shoparound index, the average price of motor insurance increased 5.2% to £549.46 in the second quarter of 2015. However, younger drivers saw the sharpest premium rises, with motorists aged 23-29 paying 6.2% more. This was backed up by ABI data, which showed the average price of an annual comprehensive motor insurance policy grew by 2.1% compared to the first quarter 2015.
In addition, Consumer Intelligence research reported over half (56%) of customers will consider switching their insurance provider when insurance premium tax increases to 9.5% in November.
All of this means brokers have a significant role to play as more focused insurance products, such as telematics policies, come to the fore to enable drivers to control their costs. For both motorists and insurance providers to reap the maximum rewards, end consumers need to be educated on what telematics products are. This puts the intermediated market in an ideal position to advise customers on what they are purchasing, what it means and what is required of them.
There has already been significant adoption of telematics in segments where the wide variation in underwriting risk is not captured by conventional pricing, including young drivers. Yet telematics should not be seen as exclusive to these niches, as brokers can offer benefits to motorists of any age or level of driving experience through these policies.
One of the considerations when introducing mass market telematics is device costs. Recent technological advances have produced more dynamically and technically efficient apps, such as hybrid apps. These have a generic HTML framework, which can be used on both iOS and Android platforms. The next generation of apps also deliver advanced functionality, starting up automatically when it detects the vehicle is moving.
Such technological development is not just limited to telematics apps, however. While premium motor manufacturers have been offering connected services for a number of years, standard brands have now also got in on the act. For example, Ford has created a global cloud-based network that enables drivers to receive software updates over-the-air, remotely start their car on schedule and find the vehicle in a crowded car park.
Similarly Vauxhall will roll out its Onstar connectivity system this summer, providing safety and security features, including automatic crash response when required and tracking for stolen cars.
Mobile telecommunications provider Vodafone has also entered the connected car market through the acquisition of Cobra Automotive Technologies, now rebranded as Vodafone Automotive. As a result, Vodafone now offers in-car telematics, the recovery of stolen vehicles and usage-based insurance solutions across the globe.
The emergence of all these new entrants to the telematics arena could be seen as a disruptive force for brokers. Yet, in my view, it is more likely to provide the broker market with major opportunities. As more manufacturers diversify into connected services, will they look to rent out the data to customers for use by their insurers? Following a similar model to Apple Music, the data could be made available for a monthly fee of, say, £10 a month, which would be offset by the savings customers achieve on their insurance premium.
Any restrictive arrangement between manufacturers and just one or two insurers would be deemed anti-competitive, so the data would need to be made available to the wider market – including those within the broking industry who are able to use it.
SSP is well placed to help brokers make the most of connected technology. Our dedicated Data and Distribution division has spent a number of years delivering telematics apps that customers can use. After providing SoteriaDrive, the first whole of market telematics-based solution available to high street brokers in the UK, in conjunction with Wunelli, we then built on this relationship to offer telematics capabilities in Australia and New Zealand.
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