Telematics today and tomorrow

Vehicle telematics continues to be transformed by advancements in technology that almost every aspect of automobile insurance is constantly being reinvented and revolutionised.

The concept of Usage-Based Insurance (UBI) is steadily gaining traction and has given way to a more accurate and fair way of pricing motor vehicle insurance, which benefits both insurer and policyholder.

Technological advancements in the areas of integrated navigation, computer and mobile communication, and data harvesting have allowed for the monitoring and analysis of driving behaviour to establish true causal risk factors with which to set definitive premium prices.

SA’s advantageous position
In this vein, policy owners will be more inclined to adopt healthy and low-risk driving behaviours, which further serve society.

South Africa has a particularly high accident frequency, with around 10 to 15% of insured vehicles reported to be involved in road accidents every year. In addition, the country has one of the highest car theft and hijacking rates in the world. All this, ironically, proves to be beneficial to the industry in that the country’s telematics technology industry is more mature and advanced than those of other countries.

Despite South Africa’s advantageous position in vehicle telematics technology, there are still obstacles that hinder the automobile insurance industry.

The smart in smartphones
The latest category of telematics solutions is in mobile communications, with smartphones working as data transmitters in cars. Because they usually have sensors such as a GPS tracking system, accelerometers and gyroscopes already built-in, smartphones seem like the ideal telematics solution.

These devices are, however, fallible and at times too easily prone to harvesting data erroneously. Accelerometer data, for instance, is essential to accurately measure driver behaviour. If a smartphone containing an accelerometer is not physically tethered to the vehicle, it will be extremely difficult to gather accurate data from it. Any movement at all by the smartphone within the interior of the vehicle will make the data collection near impossible.

Similarly, OBDII (On-board Diagnostic System Information) plug-and-play devices can easily be removed or tampered with by the driver. In some cases, it can also get disconnected from the OBDII port in the vehicle for a split second due to road conditions, compromising the data.

It is a feasible and novel concept. Yet the challenges involved with translating and vetting different port locations and data delivery between manufacturers remain a constant challenge for the telematics service providers. At this stage, it is assumed that OBDII will remain the less chosen option for telematics data harvesting for the foreseeable future.

Because of its accurate recording of driver behaviour, the traditional deep-install device is still a popular option for most insurers. A recent study indicated that smartphone technology will most likely remain a secondary technology platform until at least 2020, with deep-install devices remaining the primary enabler for the foreseeable future. The rise of smartphones is, however, undoubtedly putting these devices under threat.

Answering the ifs and buts
Another challenge that restricts the proper collection of telematics data is the fact that vehicles are locked-in by Original Equipment Manufacturing (OEM) data being proprietary to the car manufacturer.

Still, given the abundant benefits that today's telematics technology can offer both insurers and policyholders, the future is much brighter than it is dark. In fact, the spread of telematics-based vehicle insurance in South Africa seems to no longer be a question of “if”, but more a case of how quickly it will be implemented.

As it currently stands, vehicle telematics still exists as an opt-in added service to vehicle insurance, but surely there will come a time in the near-future when this will change. We are seeing the beginnings of a paradigm shift in the industry. By 2020, we believe vehicle telematics will be a standard part of any car insurance policy, with opting-out being a choice instead - but at a much-increased premium rate, of course.