Although Telematics Insurance is relatively young, it is a proven technology and as pricing remains a key difficulty, there are however, new, creative and credible models being put forward. The added problem, is that the Industry that is set to benefit most, (Insurance) is, by it’s nature – risk averse. It is a cultural issue that needs to be addressed and this can only be done by embracing such technologies that can assist in the risk management processes.
The fact is: In the future, insuring a driver, (person) may not actually have anything to do with the person. The risk of accidents occurring is based on how the vehicle is being driven in a physical space and the interaction between it, that space and other vehicles. Whether the driver is 17 years old or 77 years old, female or male, experienced or not is irrelevant. The vehicles’ capacity also has nothing to do with the risk. Whether the vehicle is a 6 litre Supercar or a 1 litre hatchback, the risk to an underwriter is no longer based on probability. It is now, based on FACT.
From the moment an individual starts the vehicle, we can measure in real time, exactly what is important by way of engine revs, speed, acceleration, braking, cornering and where and when the vehicle is performing such functions. This is the information that when properly processed by the telematics device, we are able to see the risk that the driver of the vehicle is exposing that vehicle and themselves to, i.e. their Risk Profile (RP). We should therefore, no longer think of driver insurance as being based on people and their likelihood of being involved in an accident.
I believe that future insurance policies will have a basic premium to cover the mandatory legal element as well as the value of the vehicle. The rest of the policy can be covered by Driver Credits on ‘Pay As You Go’ type policies which we now refer to as Pay How You Drive. If a device measures and reports that the vehicle is being driven well, at a ‘low risk’ time of day/night, in a relatively low risk environment, (safe, well-lit road) then fewer credits are used up by the device enabling the driver to drive longer for the same amount of money. If the same driver chooses to drive more erratically, late at night, in a known accident black spot area, then they have affected their own RP and they can see those driver credits being used up more quickly. When nearing depletion, the policy holder is sent an email/text with a link to a payments page to top up their insurance as required. Insurers have an opportunity to incentivise their customers here by offering lower cost driver credits, the more they buy.
The real benefit of vehicles equipped with telematics devices is their ability to engage with the driver. In their simplest form, a telematics device can display a traffic light system on a dash-mounted device. The good driver is rewarded for driving smoothly within a % of a speed limit in a particular area with a green light which again is reflected in an economic use of their driver credits and other social benefits due to reduced emissions. Of course, the obvious and to my organisation, the primary aim of telematics – is to influence driver behaviour in order to reduce accidents and to save lives. Again, benefitting Insurers and our road using communities.
I believe that the Insurance Industry has a responsibility, not simply to view the Telematics Insurance as an opportunity to reduce their exposure, save money and gain market share. They must embrace Telematics, which will in turn influence the driving culture of their policy holders for the good of all future road users.