By Graham Gordon, Director, Global Telematics at LexisNexis Risk Solutions
This factor alone might be reason enough to encourage wider adoption of usage-based insurance. However, what we have learnt and will continue to learn about risk reduction and pricing based on data direct from the vehicle, will help shape the future of mobility. That’s a big statement, but it’s one the insurance sector needs to keep front of mind in the race towards full vehicle automation.
Telematics insurance has helped address a problem in the young driver market – these high-risk drivers faced steep insurance costs commensurate with their risk. Telematics provides access to insurance priced on actual - rather than presumed - road behaviour. Claims loss ratios have reduced for insurers and premiums have come down. For insurance providers, the cost of investing in telematics for this niche part of their book was justified based on the average premium.
We are now close to a decade down the line from when telematics insurance was first introduced into the UK. Since then, through the advances in technology, the cost of data acquisition has fallen by around half. At the same time, improvements in data scoring accuracy gave both insurer and consumer more confidence in the product. Linked to this, there is now wider consumer appetite for UBI - based on our research of over 3000 motorists - 60% of consumers want telematics insurance.
Despite this, only 5% (largely young drivers) are offered these types of policies and as a consumer, if you wish to use your driving score to shop around for insurance, your options are limited to a small number of brokers.
Telematics insurance is the first step on the road to the connected and ultimately the driverless car. So moving telematics into a mass market proposition is imperative as connected car adoption grows.
There are an estimated 20 million cars in the US with connectivity capability, 11 million between UK, Germany, France, Italy and Spain and this volume is set to grow with 100% of new cars expected to have connectivity by 2025 .
How are consumers going to access UBI and shop around for insurance based on connected car data, if the insurance sector has not readied itself to accept and use vehicle data in pricing on a wide scale?
Telematics is the start, but we are also now actively sourcing and looking to deliver vehicle build data including ADAS features at the point of quote to also help improve pricing accuracy. These are all valuable learning opportunities for both insurance providers and car manufacturers in developing mobility services.
Scale is the key here. Car manufacturers are looking for partnerships to help them leverage connected car data. This involves creating links with the insurance sector to help better serve their common customer. It’s already happening in the US, where major car manufacturers have joined the LexisNexis® Telematics Exchange.
More and more data from many different devices and vehicles will demand data normalisation delivered by a neutral sever taking data from both sectors. This will help ensure consistent scoring and enable data portability, all with the consumers’ interests front and centre.
This is very much in line with the UK’s Government’s Future of Mobility Urban Strategy . This states in summary that, going forward where appropriate, sharing data from new mobility services will improve the choice and operation of the transport system.
Insurance providers and car manufacturers need to share data through a common platform to promote a greater understanding of risk. This starts with telematics data and soon vehicle build data. This, we believe, is the starting point for the development of semi and ultimately fully autonomous vehicles.
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