Telematics - 'The coin has two sides'

• Evaluate the adequacy of insurance rates charged

• Price risks better and charge insurance premiums accordingly

• Prevent unnecessary rate increases

• Reduce the cost of providing insurance cover in the process

• Reduce loss ratios as a result of better risk profiling

• Encourage drivers to change their driving behaviour as driving patters are linked to insurance premiums

• Explore and implement drive-through payment and other telematics related emergency road assistance and automatic collision notification initiatives

Policyholders on the other hand enjoy the benefit of having some form of control over managing their insurance risks and premiums in the sense that a driver who drives more responsibly and therefore poses less of a risk to an insurer will pay less in insurance premiums than one who drives irresponsibly. (This will also make first time driver insurance more affordable.)

To acquire and retain customers however, insurers would need to sell a wider array of benefits than just discounted premiums.

E.g. To the man on the street, fitting his vehicle with a tracking device is as much an issue of pricing as it is about his peace of mind.

The continuous tracking of vehicle location enhances both personal and vehicle security as the GPS technology used can trace a vehicle’s whereabouts following an accident, breakdown or theft. In cases of accidents, it has immediate life saving benefits as the technology allows for immediate automatic collision notification. And this is of priceless value.

To the commercial client, telematics offer a reward system for fleet managers. They can track their trucks and trailers, hopefully reducing fraud as well as vehicle thefts.

While there is no denying the endless list of benefits of telematics, the other side of the coin should be mentioned with the aim for insurers to further research and address:

• Prepaid insurance (usage-based or not) charges for future rather than past risk. With that said, it inevitably predicts some drivers' risk imprecisely, and does not reward past driving behaviour.

• A distance-based system may not distinguish between highway, city street, or rural back road driving.

• A telematics system may charge a driver who speeds but otherwise drives in a safe manner more than a slower driver who changes lanes abruptly, or drives in an inattentive or careless manner.

• Some systems use continuous GPS tracking of vehicles, which a consumer may believe infringes on their privacy.

With that said, it is important to note that one will never be able to satisfy the needs and expectations of all parties involved, but it is certainly worth to refine, as the future inclusion of telematics in insurance depends on the quality and value-add thereof.