Articles - Black box? Don’t Mind if I do

Motor insurance costs are coming down according to the latest market analysis but it’s for the drivers under the age of 25 where this is most marked . This can be credited in large part to telematics or black box insurance which is currently targeted squarely at the young driver market; around four out of five young drivers are insured on a telematics policy today .

 By Graham Gordon, Director, Global Telematics, LexisNexis Risk Solutions

 However, there are only around 1.1 million motorists in the 17-19 year old age group and around 975,000 live telematics policies , a drop in the ocean when you consider there are over 40m registered drivers. So this market may be in danger of stalling if telematics insurance doesn’t start extending out to the wider motoring market.

 The good news is that the insurance sector now has much of the evidence it needs to take telematics to new motoring segments and leverage all the investment it has made over the past 9 years in making telematics work. Consumer Intelligence analysis shows 8% of the lowest-cost deals for drivers over the age of 50 are available from telematics policies, compared with just 1% two years ago. So it seems that the benefits of targeting telematics to distinct segments of the market are already being realised.

 We know the pricing of insurance is directly linked to claims experience. So if premiums are coming down in young driver insurance, we know claims costs may also be falling for the insurance sector in this high risk segment.

 Our own analysis of road casualty statistics in direct relation to the exponential 355% growth in telematics policies since 2011 supports this. We have found that amongst 17–19 year-olds, road casualties have fallen by 31% over the past six years, compared to 11% for all motorists . The one key difference between young drivers and their older counterparts? Telematics insurance.

 So when you look at road casualty data in parallel with the penetration of telematics insurance in this age group, a strong case can be made for just how significant a role telematics has had in supporting safer driving behaviours and helping to reduce claims loss ratios.

 This is aside from the potentially significant societal benefits.

 In 2016 there were approximately 181,000 road casualties . If we apply what we have seen in the young driver market in reduced casualties across the whole population there could be 60,000 fewer casualties, 60,000 fewer people visiting hospitals; 60,000 fewer lives impacted by road collisions. These are similar to the objectives of the self-driving car. The difference is that telematics technology is here and useable today.

 And what’s more, our research of over 3000 motorists representative of the UK motoring population has shown that 60% of consumers want telematics insurance. The problem is that by and large they are not being offered these types of policies – just 5% according to our study.

 So now we know telematics works, and motorists want it, how can the industry take it to the next level?
 First consumers need to have choice and clarity over how their data is used to tackle some of the misconceptions around telematics. For example, we need to allay fears about data being shared with the police. A Memorandum of Understanding between the Association of British Insurers and the Association of Chief Police Officers would help address those concerns.

 Choice can be delivered when the industry adopts a common platform for sharing driving scores, enabling consumers to shop around for telematics insurance. This is really key as we enter an era of connected cars and as motor manufacturers look to play a role in the delivery of usage based insurance.

 The LexisNexis® Telematics Exchange will help consumers to do exactly that. Today there are about 20 brands offering telematics policies and about 30 different methods of collecting data and scoring it. What a driving score of 75 means from one insurer may be a 90 for another. So we’ve launched a telematics exchange that can normalise this data and provide the industry with a more consistent score.

 In tandem with the development of this platform to assist with enabling scoring consistency and portability, we need greater support from Government, public bodies and the media to recognise and promote the societal benefits of telematics insurance. The savings to the NHS could far outweigh an exemption on Insurance Premium Tax for telematics policies, for a start.

 With supporting evidence of the impact of telematics on claims loss ratios, insurance costs and safer driving behaviours, it is time to take telematics to the wider market and help motorists benefit from their driving data.

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