The use of telematics by personal lines insurers may have reached a tipping point, according to a new report from Celent.
The report, “Telematics-Based Insurance: Has Its Time Finally Arrived?,” says fifty percent of U.S.-based personal lines insurers, and 55 percent of those based in the U.K., currently provide a telematics-based offering
The potential of telematics has never been difficult for insurers to spot. The improved risk selection and pricing of pay-how-you-drive programs remain the obvious benefits, while the extra data could optimize claims management processes and intimidate drivers into safer habits.
Yet, a number of historical obstacles that have inhibited use by insurers are ripe for tearing down. According to the report, these obstacles include cost of devices, installation and services; lack of substantial proof that the technology pays off with lower premiums; privacy concerns surrounding the devices/data; and finding technology that the average consumer is comfortable using. Now, these concerns are quickly being allayed by a number of factors; not least among them is the rising cost of auto insurance, which is spurring interest among consumers. Also of note is the potential provided by smartphones, which could be employed as consumer-friendly intermediary devices, and positive safety implications of monitored driving, which has regulators and motor manufacturers interested in supporting, or even providing, the technology.
Smartphones and car manufacturers are helping to answer a big question behind telematics: Where will the hardware to track and report a driver’s performance come from?
Automakers installing hardware during manufacturing prevents insurers or consumers from suffering those costs, and using smartphones means consumers should be comfortable with the technology. GPS tracking devices are another option offering both the technology and the ease-of-use needed for widespread use.
Several other factors appear to be pushing carriers and consumers toward the use of telematics, such as the ability to gather crucial, otherwise-inaccessible information from accidents, the potential to monitor fuel consumption, to recover stolen vehicles, to monitor teen driving, and so on. But implementation opens the door to enterprise-wide questions regarding the depth and breadth of the role that telematics will play, and the potential overhaul to an insurer’s value chain and data systems that it could incur.
Whether insurers decide to dive in headfirst or not, telematics will continue to grow, according to the report, with broad use in the near future and microsegmentation down the road.
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