Aviva: Insurance telematics needs “a cultural change in the way individuals view monitoring”

Aviva: Insurance telematics needs “a cultural change in the way individuals view monitoring”

What does your company do?

Aviva is largest composite insurer in the UK, insuring something like 1 in 7 vehicles in the UK. My team is responsible for driving forward activities that result in improved data accuracy and reduced fraud. Externally, we also take a strong interest in road safety matters.

What is your role in the insurance telematics market?

Aviva, in the form of Norwich Union Direct, was a pioneer in UK telematic insurance products, from which we learned a great deal and overall have benefitted from our early involvement. I was motor underwriting manager through that period. My current role includes the monitoring of telematics activity, eCall, etc in terms of risks, issues, or opportunities for our business.

How important is the role of telematics throughout the insurance market?

Telematics theoretically could have a big future as rising premiums incentivize more customers down the monitored route. Also, equality issues may mean that at some point individual telemetry is the only way to get a fair premium. The EU gender directive [the European Court of Justice’s decision banning insurance companies from using gender as a basis for setting insurance rates] means young female drivers face premium increases of 25-30%. There must be another way to accurately price risk, and many may move toward insurance telematics as a result. The introduction of eCall can also be a factor in increasing acceptance of insurance telematics. (For more on the EU gender directive, see ‘Insurance telematics: What’s gender got to do with it?’.)

What is needed for the large-scale success of PAYD/usage-based insurance?

Low-cost plug-and-play infrastructure, financial incentives, and added-value services bundling to overcome the media-driven Big Brother issues. In our 2004-2005 pilots of PAYD, we found it difficult to build volume. People were concerned about ‘electronic stalking’ and 1984-style scenarios. Those attitudes are not entirely gone, but the recession has pushed them further back. People are more conscious of the cost and environmental effect of long journeys. But we need a more standardized approach, so drivers do not to have to buy a lot of different equipment. There should be one box that does everything: tracking, sat nav, behavior monitoring, emergency calls. This is essential so providers can compete for services without needing a change of infrastructure. That’s a big ask and a huge task. I don’t know where that will go. Will industry cooperate pre-competitively or develop separate, incompatible solutions? If the latter, that would be a shame.

Which trends will impact the industry the most in the coming years and why?

Equality legislation and rising injury costs work against insurers being able to price accurately. There are also many unknowns in relation to vehicle technology changes and associated repair costs. But businesses are starting to take a lead, because of corporate social responsibility as well as liability issues. Monitoring can reduce wear and tear on vehicles—on tires and brake linings, for example—so they last longer. There’s a lot in it for fleet managers as a way to control costs. Companies can also be held responsible if a vehicle is driven in a dangerous manner that causes an accident, so behavior monitoring and training provision are key. Companies are slowly beginning to see the wider benefits.

How do you view the role of auto OEMs in insurance telematics?

A generic multi-use device built in on the production line is a good thing, provided customers are not tied in to use only manufacturer-arranged services. In the interests of a free market and consumer choice, the devices need to be capable of feeding the services and companies the customer wants to deal with. Manufacturers can also use the technology to provide tips on how to drive more economically, showing they’re doing the best for the environment as well as potentially tapping into additional services. Insurers need to be able to reward behavior, but demand must be market-driven. We want to offer a very high-volume product. Our pilots featured fewer than a thousand people. Sales were steady but low, which is not cost-effective. [To create demand,] devices need to be user-defined and more integrated, a bit like apps.

Where do you see the insurance telematics industry heading in the next five years?

It will grow, but there are so many external factors involved. To really take off, there will need to be a cultural change in the way individuals view monitoring.

For all the latest on insurance telematics, join the industry’s key players at Insurance Telematics Europe 2011 on May 4 and 5 in London.

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