Charlotte Halkett discusses the evolution of telematics-based motor insurance in the UK and taking telematics to the mass market.
Back in 2008, the general consensus was telematics would not work as drivers would not want their journeys monitored 'Big Brother'-style. Others had tried and failed. And, arguably most damning of all, the UK motor insurance market overall had been making losses for years, so why bother innovating in this expensive way?
At Insure The Box, we could see beyond the initial difficulties of how telematics could work to increase driver safety, improve the customer experience, reduce claims losses and improve underwriting performance. Telematics models were widely used in Italy and the US and he had no doubt he could make it work for the UK market as well. Insure The Box started selling policies in 2010 and what a change we have seen in the telematics market since then -- it's exceeded even our own expectations.
What makes the UK market different?
While consumer attitudes to privacy have always been a challenge, Brits have quickly adapted to handing over credit card and personal information online, recognising the strong benefits associated with internet shopping. It is also important to understand how attitudes towards sharing data have also changed. Consumers today are far more used to exchanging data for rewards -- through their smartphones, for example, where users share their browsing information to receive relevant location-based information, or through shopping loyalty points and getting recommendations based on their shopping preferences. So the UK market is becoming more and more comfortable with a proposition such as Insure The Box, which delivers personalised services in exchange for their driving data.
Of course, it is not all smooth sailing. The rapid development of telematics technology itself means we face a neverending challenge to stay in front and stay innovative.
What is the next big thing?
Some providers are pushing app-based solutions but we believe black boxes are the most reliable option -- and the best way to provide quality claims management, counterfraud protection and effective safer driving feedback. Costs for manufacturing and installing the devices have been falling rapidly -- in 2009, a typical black box could cost £140 but now you can get afar superior device for £40. If you put that alongside the fact that telematics volume has the potential to increase dramatically in the near future, penetrating the mass market, those costs will come down still further. to increase dramatically in the near future, penetrating the mass market, those costs will come down still further. therefore a way forward for the industry. However, the size of the used car market is such that it will take years for this technology to reach all.
Some have suggested OEMs could encroach the insurer space and, yes, connected cars are becoming the norm. A high proportion of new cars already roll off the production line with built-in connectivity and the ability to collect some driving data. However, this data is not necessarily aligned with what insurtech needs. Also, telematics is an extremely business-to-consumer market and will not be successful without direct and ongoing communication between provider and policyholder. There is the question about whether all OEMs have enough experience in dealing with customers in this way.
What does the future hold?
Data, data and even more data. Telematics was the first real working example of the internet of things (IoT), but the expansion of IoT brings with it an explosion of data and resulting product innovation. Connected cars are an example again, leading to semi-autonomous and fully autonomous cars in the years to come.
The data produced by telematics is vast and provides valuable insights. We have developed models based on pure telematics driving data and these have provided strong correlations with actual accident claims frequency. However, combining that data with more traditional factors such as age and where the policyholder lives, means we can extract a lot more information for claims assessment.
Telematics data also opens up the possibility to help the driver in new and exciting ways. For example, if we see that a customer regularly goes on a route that includes an accident hotspot, you might warn them and reduce the risk of an accident. This is a whole new ball game as it then starts to integrate with customer psychometrics. We are just beginning on this particular journey and believe that is the next phase of using real-time information in a big data environment.
These are exciting times in telematics, as we approach the day when it becomes mainstream and the amount of data multiplies exponentially.
Charlotte Halkett is the general manager of communications at Insure The Box. The data produced by telematics is vast and provides valuable insights.