Ten reasons why the insurance industry should care about telematics
eCall will benefit insurers: Improving traffic safety has been a top priority for the insurance industry ever since passenger cars became prevalent. Many new car safety features have been embraced and promoted by the insurance community in the past. eCall deserves a similar treatment as the system is capable of saving claims costs as well as lives.
GPS anti-theft systems reduce car thefts: The number of cars disappearing through theft has declined in recent years. This is largely due to improved car security features. One of them is GPS tracking devices, which are now widely required by motor insurers on high-end car models.
Telematics is efficient for fraud prevention: One of the reasons why Italy's motor insurers have embraced telematics is because it helps them to expose attempted fraud. Basic vehicle data can say a lot about what has really caused an accident or why a car has disappeared.
Improved risk management for commercial fleets: About two-thirds of all company drivers have at least one insurance claim per year. With access to vehicle data collected by fleet management systems, insurance companies and their agents are able to reward fleet operators who maintain a high standard in traffic safety.
Research purposes: Floating car data can provide motor insurers with valuable statistical data about driving behaviour that can be used for fine-tuning their complex models for premium calculation.
Product differentiation: The motor insurance industry is fiercely competitive with very low margins. Telematics allows differentiation on grounds other than just pricing. Subsidising GPS trackers may be worthwhile – even for ordinary cars in neighbourhoods with high crime rates, and low-mileage drivers can benefit from pay-per-use billing
Creating incentives for high-risk drivers: Male drivers aged 18-25 pay premiums several times higher than older drivers because they are more frequently involved in accidents. By installing a telematics device they have a chance to save considerably by proving themselves to be more careful than the average.
Pay-as-you-drive insurance can still become a reality: There is still much work to be done and the systems may become more complex than first anticipated, but the vision is still achievable.
Ownership interests: Royal Bank of Scotland, one of Europe's five largest non-life insurance providers, is the owner of TRACKER Networks – a leading provider of stolen vehicle tracking and fleet management systems in the UK.
Everybody else does: Allianz, AXA, Generali and Aviva are just a few of the top international insurance groups that have launched telematics offerings on the European market.
Tobias Ryberg is a senior analyst at Berg Insight
