In its brief existence, telematics has been described as the next
great tool for underwriting personal auto policies, but in his
report for Celent (Innovation in Focus: The Great Telematics
Experiment), senior analyst Craig Beattie maintains the technology tool goes beyond the basics of measuring a car’s speed,
acceleration, cornering, and braking.
“There are groups of people who fervently believe telematics
is the future, but you speak to others in the industry, equally
qualified and some very familiar with the technology, and they
say people don’t want to share their data,” says Beattie. “It’s
almost a religious debate with people in one camp or the other.”
But Beattie looks past the debate and believes products such
as General Motors’ OnStar will advance beyond underwriting.
One place telematics is proving its worth is when parents buy
vehicles for their children.
“The selling point isn’t the cost of insurance, it’s about the
car being upside down in a ditch and the telematics company
having the ability to call an ambulance and sort things out,” he
says. “It’s the safety angle: Big Brother looking out for you.”
Beattie pointed out that a UK motor club that offers per-
sonal auto policies, has discussed installing a device in cars, but
their core business, like AAA in the U.S., is vehicle rescue.
“They have plans where you put a device in the car, it tracks
where you are, and if the car breaks down they can come to you
more easily,” says Beattie. “The device will also inform you before
the car breaks down that it is likely to break down. Rather than
having the inconvenience (of being stranded on the side of the
road), they can tell you your car needs repairs.”
Another proposition being studied involves newer vehicles
that offer drowsiness alert when the car begins to drift and
other driver attention detection systems.
“Those systems look at your location and can tell you there
is a Starbucks down the road and if you stop there (the insurer)
will give you a coupon for 50 cents off your coffee,” says Beattie.
The real value of the device long term involves understanding
where the customer is, what they are looking for, what they might
need, and giving them relevant options, according to Beattie.
“You are capturing the information and offering value-add-
ed services, including insurance,” he says. “[Customers] are not
trading privacy for cheaper insurance; they are trading it for what
you see on Twitter and Facebook—convenience, being connected
to your friends—and if they are interested they come and find it.”
Beattie believes there will come a time over the next five years
where auto insurers will have to make a decision: Do they engage
with their customer in ways they never did with a classic auto
insurance policy and move to a model where you regularly talk to
customers about their policy, give them incentives to drive, and
be an engaged insurer or is someone else going to do that and you
as an insurer get pushed away from that customer.
As for collecting the data, Beattie believes telematics is in
a transition phase. The three phases of data collection involve
after-market devices, which will transition to leveraging mobile
devices with Bluetooth for connectivity, and what he calls “the
obvious end game” with a connected vehicle. “A number of new
cars are being built with connectivity, but it’s going to take some
time, which is why there will be a transition stage,” he says.
One of the most price competitive markets in the world at
the moment is the UK, points out Beattie, and if you’ve been
driving a number of years without any claims or convictions,
you can get a policy for a few hundred pounds.
“The reason telematics has taken off [in the UK] is people
that drive only on weekends can pay less because they do tens of
miles a month,” he says. “The young can’t get access to any kind of
insurance policy. They are unproven and they are likely to have a
severe accident that is going to cost a lot of money. They are buying
a car that costs 400 pounds and being asked to pay 4000 pounds in
The Future of Telematics
Heads Beyond Insurance
Data collected from automobiles can tell as much about the drivers as it does
on how fast they corner turns.
By Robert Regis Hyle
US and UK Residents’ Response to
Criticism of Their Driving
“Your current driving style suggests you have a 1 in 3 chance of a fatal or
very serious accident in the next year, click here for driving tips (n=2340)”
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