General Insurance Article - Fitch positive on impact of telematics for insurers

 Fitch Ratings believes the UK motor insurance industry's earnings will benefit from the growing use of telematics.

 As pressure on insurers' earnings from underwriting is expected to continue, these tools have the potential to improve the profitability of motor insurers by addressing long-standing industry issues including increased claims costs and fraud. Telematics technologies could help insurers to better price their risks leading to more informed underwriting and improving customer retention.

 While the telematics penetration rate is still low, regulatory changes and partnerships between insurers and technology providers could promote the growth of the telematics market. The eCall initiative will require all new cars in the EU to be equipped with telematics devices by 2015, providing the opportunity for insurers to use this infrastructure for telematics-based policies.

 As the use of new technologies becomes commonplace in the industry, there will ultimately be winners and losers. Firms with agile operating structures and efficient decision-making processes will be better positioned to benefit from the innovation. Insurers implementing telematics earlier than peers will also be likely to benefit from retaining lower risk drivers.