The new wave of telematics

FA News polled the industry about the increasing use of telematics. We asked whether it is here to stay. What are the benefits and challenges of using this technology? And how navigable is the balance between what insurance companies want, and what their customers would be getting from this technology?

Telematics is used for car insurance where individuals are rewarded with lower premiums or other benefit for displaying good motoring and driving habits.

 

A black-box device is installed in the driver’s vehicle to track when, where and how the car is driven. This technology monitors specific driving habits such as acceleration, braking, harsh cornering, and speeding.

 

Insurance company actuaries use the information to adjust premiums according to the risk profile of an individual vehicle, of which a large portion is based on how well, or defensive, a person drives. The telematics information also assists in validating claim information and can significantly speed up response time related to claims.

 

Latest innovation for insurance telematics, including technology from Ctrack, focuses on driver behaviour monitoring and analytical capabilities. This has added a new dimension to the traditional relationship between insurance companies and their insureds, enabling insurers to conduct ongoing positive dialogue with each client based on individual behaviour and risk profiles.

 

Examples include safer driving or improved green monitoring lifestyles. Supported by loyalty schemes to reward the client, these are guaranteed to nurture responsible and good driving habits.

Deon du Rand

Chief Technology Officer

DigiCore, supplier of Ctrack

Telematics insurance will become the norm in South Africa within the next five years. Already in the US over 1 million telematics devices are in use, expected to increase to 5 million by the end of 2013. Italy and Brazil has legislation, forcing all new vehicles to be fitted with the device.

South Africa’s biggest challenge is the confusion between telematics and tracking devices. Telematics is technology similar to that found in smartphones, embedded in our vehicles. It allows insurers to monitor driver behaviour and effectively adjudicate claims.

 

Internationally, there are more than 100 telematics-enabled insurance programmes in use. Some are focused on safety, while others are pay-per-use oriented.

 

Technology available in South Africa is among the best in the world. The challenge for motor-focused insurers is to stay competitive through continual innovation. Oakhurst Insurance has been using telematics since 2009 to drive down clients’ insurance premiums and reward good driving behaviour.

 

The company has derived multiple benefits from the use of telematics, allowing us to optimise our risks, mitigate claim costs, be more competitive with rates based on accurate data, and eliminate fraud and investigation costs. Additional benefits include the safety and security element for clients: an instant automatic crash notification and analysis; immediate on-scene assistance; and stolen vehicle recovery.

The company has come up with ways to incentivise good driver behaviour through the Good Driver Programme. Clients gain bonuses on five key metrics. Good drivers are rewarded with monthly cash-backs of up to 25% of the monthly premium.

A challenge, however, is that South Africans have privacy concerns around the technology. They fear that claims will be repudiated because of the data available from the telematics device. However, telematics would actually speed up turnaround times on valid claims.

Brett Erasmus

Broker Manager

Oakhurst Insurance Company Ltd

The commercial accessibility of global positioning system, or GPS, heralded the start of telematics that currently defines the tracking industry and its fleet management capabilities.

 

Adding an accelerometer to a tracking device provides the means to determine driver behaviour by computing the different forces applied to a vehicle in real time.

The use of telematics and visual information from on-board cameras will propel the tracking industry to new heights of deliverables, with means to revolutionise the way that we drive our vehicles. Not only, as a fleet manager, would companies be able to track their drivers more effectively, but insurance companies would have a better grip on the risks they are dealing with.

The ability to manage driver behaviour for the better will in turn reduce loss ratios as accidents decline.

 

A very large percentage of insurance claims pertain to accidents, with speeding as a key cause. In the claims process, telematics answer the "how” and "why” questions with tangible evidence that allows for proactive planning and intervention. It allows insurers to assess whether clients have actually disclosed their vehicle use in line with what they are insured for.

For the individual client the technology will ensure a personalised insurance premium based on individual risk profiles, benefiting the responsible driver with a lower premium.

Brokers are instrumental in communicating the benefits of telematics to clients.

John Edmeston

Managing Director

Cartrack

Telematics technology provides insurers with an antidote to decreasing underwriting margins, while presenting an opportunity to understand the fundamental risk factor in motor vehicle insurance: driver behaviour.

 

By monitoring diagnostics such as the forces acting on the vehicle, telematics devices can accurately measure whether a driver’s actions push a vehicle close to the edge of its capabilities and increase the risk of an accident.

 

Telematics makes insurance tangible to clients in an entirely new way, enabling them to understand their driving behaviour and improve to reduce their chances an accident. Motor insurers and financial advisers will in turn access richer individual and more descriptive collective data than the sector has ever known.

 

Insurers can use the technology to their advantage by reducing claims through not only having access to more accurate driver data, but also by incentivising better driver behaviour.

For example, Discovery Insure, in partnership with Ctrack, offers a stolen vehicle tracking and recovery device fitted with an accelerometer to measure driving behaviour.

The device is available to Vitalitydrive clients at no cost. Clients receive monthly feedback on their driving behaviours, as well as suggestions on how to improve. The better clients drive, the more rewards they get.

Telematics helps insurers to better engage and connect with their clients by providing feedback and unique product and safety features.

For example, the Discovery system alerts the insurer when a client’s vehicle experiences a severe G-Force, which could indicate an accident, enabling Discovery Insure to dispatch an emergency team immediately to the client’s location.

Anton Ossip

CEO

Discovery Insure

Arguably, now is the best time in the cycle to release a telematics product. Consumers want to reduce monthly costs while our economy is slowing. A reduced monthly cost in whatever form will be most welcomed at present. So, if the telematics product provides a discounted premium, it could very well be ideally positioned purely on this aspect to force a switch.

However, South Africans may not be too thrilled with having somebody watching over their shoulder 24/7, especially if it is their insurance companies. Clients often have the viewpoint that when they pay their insurance, it should pay out in the event of a claim, regardless of whether it constitutes a fair claim. In general motor insurance clients are often somewhat ignorant of policy terms and conditions, which can lead to difficulties in settling claims.

 

With telematics in the picture clients could view the use of the technology as an attempt by insurers to find loopholes in not settling claims.

Here brokers will surely play a role, since they can properly advise clients of the advantages and disadvantages of the product before any purchase is made.

 

As the technology gains traction in the South African insurance market, we may very well see an uptick at the Ombudsman’s office from clients’ complaints of non-payment, more so if they have not properly understood the policy terms at inception.

 

Clearly brokers will play a vital role in delivering proper and sound advice to clients on telematics-based motor insurance.

Shaheen Rajab

Director: Marketing and Technical

New National Assurance Company Ltd

Telematics is the foundation of vehicle recovery making its mark. This was the platform where telecommunications and IT intersected to deliver data and services through GPS, notifying us of a car’s whereabouts, but also holding hands-free kits and infotainment under its umbrella.

 

Now there is a new, more dynamic offspring that is promising to change the automotive industry as we know it. I call it Telematics 2.0.

 

It seeks to take technology and data, largely reserved in the past for GPS and vehicle recovery, and drive it hard into cost savings and safety. The consumer can be tracked and then assisted in a roadside or medical emergency, even at the touch of a button in the car. In the case of an accident, an impact signal is sent to emergency services for immediate dispatch. Early warning signals can be monitored with regards to vehicle servicing and maintenance, and drivers can assess mileage data for their tax logbooks.

 

Insurance companies can use the data to attract policyholders through new pay-as you-behave products, waiving discounts, or the theft excess on the vehicle, building driver scorecards, and also receiving crash reports upon impact.

 

However, change with all its benefits is not an easy concept to grasp.

The main perceived disadvantage is the Big Brother effect. People perceive this as yet another surveillance technology spying on us. But telematics is an opt-in technology for the driver or business owner, that offers benefits, some of these including: reduced premiums; improved personal safety; vehicle maintenance; peace of mind; and the economic efficiencies to a business.

Insurers and their intermediaries can gain a competitive edge in a market place where technology consistently disrupts traditional business models.

Michael Nieuwoudt

Business Unit Director

Tracker