Insurance telematics: Making inroads in the African market

Insurance telematics: Making inroads in the African market

When it comes to telematics, Africa represents a key emerging market.
South African companies like Altech Netstar, DigiCore, and MiX Telematics offer cutting edge fleet management and stolen vehicle recovery services.
Companies like NAVTEQ and iGO My way offer detailed mapping and navigation solutions across the continent.

So the growing interest for insurance telematics solutions in Africa shouldn’t come as a surprise.

At the end of February, Octo Telematics and Altech Netstar announced a new insurance telematics solution for the African market.

Smaller companies based in Africa, like Insure Telematics, have recently unveiled insurance telematics solutions of their own.

As insurance telematics opens up new markets, Africa is turning out to offer unique growth opportunities.

“Africa has significant potential for the development of insurance telematics, and this is the right time to enter the market,” says Fabio Sbianchi, CEO of Octo Telematics. (For more from Octo Telematics, see ‘Insurance telematics: Differentiation is at the core of every value proposition’.)

South Africa’s appeal

South Africa is an ideal location for insurance telematics, for two reasons.
First, South Africa has sophisticated vehicle-tracking companies that already collect the kind of data on which insurance telematics relies.

“The South African market [for stolen vehicle recovery and fleet management services] is arguably in line with Europe and the US,” says Harry Louw, managing director of Altech Netstar.

“Penetration levels are high, and the products and services are sophisticated.”
Therefore, creating an add-on service for insurance companies that harnesses an established database isn’t much of a stretch.

Second, South African drivers have high accident rates, and there are numerous insurance companies seeking to achieve competitive advantage.

“Competition among the insurance companies pushes them to differentiate from each other,” says Mauro Cantoni, Octo’s vice president of sales.
“So the situation is similar to when insurance telematics was first moving into Europe.”

The rest of the countries in southern Africa—Botswana, Namibia, Swaziland, Mozambique—have benefited from their proximity to South Africa, and many have developed telematics markets of their own.

Kenya is the largest market in East Africa and Nigeria the largest market in West Africa; elsewhere telematics has yet to catch on.

Insurance telematics solutions

Octo Telematics plans to introduce the same insurance telematics service it offers in Europe and the US with few changes in Africa.

The service will run on the back of Altech Netstar’s existing services for the insurance industry, which predominantly consist of stolen vehicle recovery.
“Our focus is to replicate the Octo service in South Africa with as little modification as possible,” says Louw.

Altech is currently conducting proof-of-concept exercises with various insurers in South Africa, whose response has so far been favorable.

Once Altech and Octo establish customers in South Africa, they will ramp up operations in Swaziland, Botswana, Zambia, and Namibia.

In 2012, the two plan to expand into Ghana, Nigeria, Kenya, and Mozambique.
At last year’s Insurance Telematics USA conference, Insure Telematics introduced another insurance telematics solution for the African market: MiDriveStyle.
The rating device transforms vehicle use data into detailed driver profiles, which insurers can use to offer flexible personalized premiums.

The device also communicates with customers via simple images.
Traffic lights alert customers to the behavioral factors that affect premiums, and a water basin drains each time drivers expend some of their premiums.
“It’s a beautiful time to be in this market,” says Insure Telematics founder, Johan Van der Merwe.

“Telematics is going to drive the next wave of innovation in the short-term insurance industry.”

Insure Telematics has already partnered with the South African insurance company MiWay to launch and test the product locally.

Anticipated challenges

The insurance telematics model will certainly face hurdles in Africa.
Legislation is one issue, as laws can vary dramatically from one country to the next.

Any insurance telematics offering in Africa will have to include stolen vehicle recovery (SVR).

In South Africa, SVR services are generally outsourced to private contractors, for which existing legislation allows.

But this model is not always suitable for other countries in Africa, so providing a uniform service will not be straightforward.

Likewise, different African countries have different penetrations and distributions of vehicles, which will necessitate different market proposals.
Nonetheless, South Africa and other pockets around the continent offer a strong opportunity for growth.

“Along with our partners Octo, we relish the prospects of growing this fledgling market segment in the years to come,” says Louw.

Andrew Tolve is a regular contributor to TU.

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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