By Telecom
Lead Team: The number of global insurance telematics users will grow at a CAGR
of 90 percent from 1.85 million in 2010 to 89 million in 2017.
While
insurance telematics or usage based insurance (UBI) is far from a recent
phenomenon – US-based Progressive was already trialing solutions back in 2002 –
a renewed interest in this market has occurred over the past two years, with an
acceleration in uptake, as well as a dramatic change in the very nature of UBI,
migrating from pay as you drive (PAYD) to pay how you drive (PHYD) based on
continuous driver behavior monitoring and analysis,” said Dominique Bonte,
group director, telematics and navigation, ABI Research.
UBI allows
insurance vendors to establish a continuous communication and feedback channel
to build brand loyalty in an increasingly competitive auto insurance market. In
the same way, value-added service packages including emergency services,
roadside assistance, stolen vehicle tracking, teen driver monitoring, and
vehicle diagnostics are often offered.
The
de-averaged pricing model and fairness principle of UBI to treat customers as
individuals and have them pay for the risks they are actually taking instead of
premiums depending on inaccurate proxies such as age and gender is gaining
acceptance.
Many barriers
hindering mass market uptake are still in place: self-selection of low risk
drivers, privacy, lack of understanding of complex offers, lack of historical
perspective validated by statistical data, absence of standards, installation
of telematics hardware, and IP litigation.
While
currently the default UBI hardware solution consists of a dedicated device
plugged into the vehicle’s diagnostics OBD port, future UBI hardware solutions
will increasingly be based on either factory-installed technology (as in-car
connectivity penetration rates increase) converged devices such as smartphones
wirelessly connecting to the OBD bus via Bluetooth adapters.
Meanwhile,
young drivers in Britain are being encouraged to drive more safely thanks to
the introduction of telematics technology, according to The Co-operative
Insurance. More than a third of drivers are driving in an -excellent’ way, with
a small proportion guilty of -poor’ driving.
The Young
Driver scheme measures a number of driving behaviors, such as cornering and
speed. Behaviours are scored from one to five (poor to excellent respectively)
with premium discounts for those who score well on a consistent basis. At
present 97 percent of male drivers have received discounts, slightly ahead of
women, of whom 92 percent have earnt a discount.
