The Exciting Opportunity of Telematics
A new report by BIS Research reveals that the number of telematic boxes installed in cars globally will reach 169 million units in the next four years with a growth rate of close to 50 per cent (47.1 per cent).
The UK, Italy and the US are the most advanced markets with the highest numbers of innovators and early adopters entering the market. EMEA is expected to take over from America and lead market share by 2022 as the early majority make the move to black box insurance.
The benefits of telematics are twofold – they are positive for both the customer and the insurer.
On the customer side telematics bring with them significantly reduced premiums through data-fed policies such as ‘Pay-As-You-Drive’, which restricts driving to certain times of day or requires a low mileage. However, as increasing levels of data are being collected by insurers new initiatives are being launched to further personalise premiums. For instance ‘Pay-How-You-Drive’. In this case the black box aggregates information on how the driver performs behind the wheel and logistics along with average mileage.
The number and intensity of accelerations and stops, driving timetable, speed, location, road conditions, time of day, day of the week etc. are all taken into consideration when calculating a cost. The better a person drives, combined with where and when they drive dictates how much they pay. Therefore a middle aged person with no prior accident history, driving a small car on quiet roads during the day will pay much less than a younger driver with prior accident history, commuting daily on busy roads. This application also has gamification implications as analytics can be delivered back to the driver each month and they can try and enhance their driving performance.
Telematics also offer a wealth of value-adding services. For instance insurers can push speeding or bad weather warnings to their drivers in real time, but they can also make the claims process much easier. For instance Metromile in the US has revolutionised the claims experience through AI and data science delivered through their telematics-linked app.
Gone are the days of tedious form filling and long waits, the smart claims system is almost instantaneous verifying claims in seconds and quickly and accurately resolving them. Metromile also aims to issue instant payments and assist with scheduling repairs by the end of the year.
Consequently through telematics not only does the customer get to pay less for their car insurance, but they also get a more personal and valuable experience from their insurer.
There are also benefits for the insurance company. Telematics enables insurers to have more regular and interesting interactions with customers – for example the monthly driving report. This is proven to enhance customer satisfaction as the relationship between the two parties is strengthened. Additionally, the wealth of data that is generated and collected enables insurers to update risk models in real time and enhance policy decision making, which in turn positively impact the bottom line.
So a win/win situation for all. With the adoption of telematics set to increase, the key for insurers will be preparing themselves for the raft of data they are going to have access to and ensure that they use it effectively.
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