How do insurers use telematics data? While the use of telematics is becoming a growing reality in South Africa, the pertinent question on everyone’s mind is how their insurer is processing and using their information.
This is one of the major stumbling blocks with the adoption of telematics. The public feels that insurers will take a ‘Big Brother is watching’ approach by using telematics data as incriminating evidence when it comes to claims stage. However, the reality is significantly different.
Creating a safe road user
In a recent presentation Anton Ossip, Chief Executive Officer (CEO) of Discovery Insure, assured the industry that telematics data would never be used to reject a claim. He added that this was in fact stipulated in Discovery Insure’s policy schedules.
This standpoint was reiterated by Discovery Insure Executive Director, Themba Baloyi, at a recent telematics conference.
“The purpose of developing a telematics product is to create a nation of better drivers. While we all think we are better than the average driver, the reality is that we are not,” said Baloyi.
As he went through his presentation, it was clear that South Africa has a number of significant cultural differences which need to be overcome.
“Through promoting a safer driving culture, we will not only help to overcome a significant industry challenge, but we will also be able to create a safe environment for the South African public.
Slaying an industry bugbear
Through the information collected by Discovery, the insurer can analyse how accidents happen, and then take specific steps in order to reduce them.
This is primarily done through the use of detailed reports. If you sit with a person and tell this person that he is an aggressive driver, there is a good chance that he will not believe you. However, if this person is presented with a report about his driving habits, he might sit up and take notice of his behaviour.
Accidents are a major cost driver in the insurance industry. Baloyi pointed out that if accidents are reduced, costs within the industry can be reduced as insurers do not need to face significant pay-outs. If we can get to this stage in the industry, these decreases can be passed down to the consumer in the form of lower premiums.
“The rest of the world has improved over time when it comes to decreasing accident mortality rates. It is only South Africa and Malaysia that are not making any strides in this area. This is a problem,” said Baloyi.
Measuring behaviour
Besides the fear of how insurers will use telematics data, the cost of implementation is one of the major deterrents in the industry.
This is actually an easy problem to overcome. Baloyi pointed out that the smartphones of today have significantly more capacity than the computer which launched Neil Armstrong into outer space in 1969.
“If insurers do not accept telematics, they will become extinct. We are living in an increasingly connected world. Through mobile technology, we are able to access and share data with the click of a button,” says Baloyi.
He added that the insurer needs to take the data it has collected from it’s driver to interpret it in an easy way. “Telematics was first used in Formula One (F1) racing. From the pit lanes, the driver’s support team tells him how he needs to drive in order to reduce the effects of g-force on his body. If this can be achieved in a high level sport such as motor sport racing, why can it not be used on the road? We obviously do not want the public to drive as fast as F1 driver, but if they can drive with the same level of sophistication, then we can really make a difference,” said Baloyi.
Offering incentives
There is a trend in Europe whereby insurers are moving away from gender based profiling towards customer based risk profiling. While Baloyi indicates that the data collected by Discovery Insure shows that women are better drivers then men, the move away from gender based profiling does have its advantages. It creates a deep individuality of each driver and it allows insurers to differentiate each customer better. It is very possible that a male driver can be a better driver than the average female driver, but he is unfairly disadvantaged by facing a higher premium just because he is a male.
There is a significant debate in the industry about the collection of data and who that data belongs to. Currently, it belongs to the insurer. But with the introduction of the Protection of Private Information (POPI) Act, it could possibly belong to the driver in the future. It is then conceivable that the driver may use this data to negotiate lower insurance premiums.
However, this will not be the case with Discovery. “We will not take this stance. Clients will not be able to come to us to negotiate lower premiums based on their driving habits. This is a credibility issue. They will then start to question how the insurer is using their data,” concludes Baloyi.
Another statistic Baloyi pointed out is that younger drivers who are insured in personal capacity are a greater risk to the insurer than younger drivers who are covered on their parents policy. This is because parents are able to sit down with the driver and figure out ways to improve their driver behaviour.
Editor’s Thoughts:
The use of telematics is still in its early stages and it will be interesting to see how this develops over time. Incentivisation will be a game changer in this market and the company who can offer the best incentives could win the fight for telematics dominance in the industry. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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Added by Craig, 08 Oct 2014