ABI Research identifies 10 reasons why the insurance industry should care about telematics

28 Aug 2008

Tobias Ryberg, senior anylist at Berg Insight, gives ten good reasons why insurers should care about telematics:

• eCall will benefit insurers: Since the establishment of passenger cars, traffic safety has been a concerning topic for the insurance industry and community, embracing many new car safety features. eCall deserves a similar treatment as the system is capable of saving claims costs as well as lives.
• GPS anti-theft systems reduce car thefts: Due to improved car security features like GPS tracking devices, the number of cars disappearing through theft has declined in recent years.
• Telematics is efficient for fraud prevention: Helping Italy's motor insurers to expose attempted fraud, one of the reasons why they have embraced telematics. Basic vehicle data can say a lot about accident or theft circumstances.
• Improved risk management for commercial fleets: About 60% of all company drivers have at least one insurance claim per year. By analyzing the vehicle data collected by fleet management systems, insurance companies are able to reward fleet operators who maintain a high standard in traffic safety.
• Research purposes: Motor insurers can use the floating car data for statistical purpose to improve their complex models for premium calculation.
• Product differentiation: Telematics allows differentiation on grounds other than just pricing. Subsidising GPS trackers may be worthwhile - even for ordinary cars in neighbourhoods with high crime rates, and low-mileage drivers can benefit from pay-per-use billing.
• Creating incentives for high-risk drivers: As male drivers between 18 and 25 years pay premiums several times higher than older drivers they can profit from installing a telematics device, because have a chance to save considerably by proving themselves to be more careful than the average.
• Pay-as-you-drive insurance can still become a reality: The vision is still achievable, even though there's still much work to be done.
• Ownership interests: One of Europe's five largest non-life insurance providers, Royal Bank of Scotland, is the owner of TRACKER Networks - a leading provider of stolen vehicle tracking and fleet management systems in the UK.
• Everybody else does: Allianz, AXA, Generali and Aviva are just a few of the top international insurance groups that have launched telematics offerings on the European market.