Telematics—a Game-changing Opportunity for Motor Insurers
Barely a day goes by without us hearing about a motor insurer somewhere in the world launching a telematics pilot project. This is a technology with massive transformative potential for the industry, yet it still faces a wide range of strategic, technological and regulatory obstacles.
The result is that the world’s largest P&C insurers are finding it challenging to make telematics a mainstream reality in their businesses. Over the course of the next five posts, I will explore the potential of telematics to fundamentally change motor insurance propositions. I will also look at the barriers to adoption and how motor insurers can overcome them.
In Accenture’s view, telematics is a game-changing opportunity for insurers to fundamentally change consumer perceptions and to reshape the global motor insurance industry, dramatically altering every aspect of the insurance value chain. Telematics will eventually impact all areas of the motor insurance business by delivering:
- Improved risk selection and pricing.
- Reduced claims and improved fraud detection.
- Higher levels of customer retention.
Telematics has been spoken about for years, but a number of factors are now converging to create an environment where the concept can flourish. The technology has become cheaper and more sophisticated, making it more viable and attractive.
At the same time, consumers are becoming more open to adopting telematics, while governments and regulators are putting regulatory frameworks in place that address the privacy concerns the technology raises.
And of course, with motor insurers worldwide facing an ongoing struggle for profitability, they are eager to adopt innovations that can help them reduce fraud and churn while improving their ability to price risk with pinpoint accuracy.
Some examples of the business drivers for telematics in different territories are as follows:
- North America: High motor insurance premiums (particularly for young drivers); marketing campaigns and installation of standard on-board diagnostics.
- European Union: EU Gender Directive banning the use of gender as a rating variable; potential future impact of the eCall system and General Data Protection Regulations.
- UK: High motor insurance premiums and high incidence of fraudulent claims.
- Germany: Automotive and roadside assistance companies offering telematics-focused insurance products as a value-add.
- South Africa: High incidence of vehicle theft and road accidents, along with an established market for stolen-vehicle-recovery and fleet management services.
- Brazil: Government legislation mandating embedded telematics services in new vehicles as a response to high levels of car theft.
- Asia Pacific: Development of telematics features by motor manufacturers; relaxation of regulatory restrictions in China to allow free-market pricing in motor insurance.
In my next post in this series, I’ll look in more detail at the obstacles to mainstream adoption of telematics. You can find the other posts in this Digital Insurer series here.
Read the Insurance Telematics: A Game-changing Opportunity for the Industry report here.