Telematics trends in car insurance

How are advances in telematics technology changing car insurance?

First-generation telematics programmes offered plug-in devices for a short time for premium discounts. The second generation uses on-board diagnostics (OBD) ports. Third-generation technology is a lot less expensive and supports continuous monitoring of driver behaviour by using smartphone apps with or without sensor tags attached to vehicle windscreens. 

What kind of information is telematics capturing?

The physics-based information from sensors captured via phone apps mainly includes smartphone-related distraction, speeding, hard braking, cornering, acceleration and road type. Smartphones are ubiquitous, so there are no installation issues with OBD ports. Additional risk factors, such as distracted driving and road type, provide a much clearer picture of risk.

The capabilities of smartphone telematics with sensor tags, also called beacons, enable higher levels of accuracy from multiple sensors. The combined technologies collect information, including distance and time driven on specific vehicles. Furthermore, with a tag, you can measure how much a specific driver operates an individual vehicle. Finally, the tag acts as a privacy device, ensuring that the apps only capture information when close to the tag. 

The opportunities arise not just from collecting data. When policyholders agree to share data continuously, companies can create new business models that were not possible before.  

How is continuous monitoring changing insurer business models?

The switch to continuous monitoring enables insurers to update discounts over the life of the policy. In South Africa, Discovery Insurance has built an entire strategy around continuous monitoring. Its product, Vitality, offers the most progressive approach to risk prevention. Besides rewarding safe drivers with cash-back on fuel and car repair discounts, the programme provides post-accident assistance with towing and initiates the first notice of loss (FNOL) to kick start the claim process.

The majority of the top ten insurers’ telematics programmes have transitioned to continuous monitoring. Most recently, Travelers announced “Intellidrive Plus,” an enhancement to their programme to transition to continuous monitoring.

What else does continuous monitoring offer?

Matching the rate to risk over the life of the policy is key. Furthermore, continuous monitoring gives the insurer significant enhancements in driving safety and risk management. Distracted driving is the most common but generally underreported cause of crashes. Phone sensors are now sensitive enough to pick up on drivers when they merely touch their phones. They are accurate enough to know when someone is driving or merely a train passenger.

Changing driver behaviour and reducing risk means showing drivers the link between their actions and the potential impact. Analysis by Cambridge Mobile Telematics demonstrates that the more drivers engage with their driving data via mobile app, the greater the likelihood that their habitual behaviour will change. Using methods of regular engagement, such as weekly rewards or social gamification with badges and leaderboards, encourages long-term behavioural change.

What about rating and pricing, the original application of telematics for insurers?

Many traditional rating factors correlate driver characteristics to premium. Telematics data, however, is causative. Since telematics data is directly linked to how the motorist drives, insurers and insurtechs can more accurately match the rate to risk in pricing. We are still just scratching the surface of what is possible.

Since telematics can now quantify which risky behaviours are more likely to contribute to crashes more than ever before, Cambridge Mobile Telematics is building models that can predict the crash risk. The majority of risk elements currently used in telematics programmes are quantifications of hard braking, risky acceleration, speeding and smartphone usage. That said, the factors being used are advancing quickly with better understanding of the core dynamics that lead to crashes. With that, insurers can better price and reduce risk through the right incentives and communication structure.

On the topic of price, some insurers are offering up-front discounts of 10% and post-assessment prices that top out around 50% lower than their non-telematics-based policies. The majority of programmes launched in the last few years are focused on connecting driver behaviour to the price they pay for insurance. Even more importantly, telematics is showing the driver the link between these elements to continuously provide value to the driver for reducing the risk to themselves and the carrier.

Anything else car insurers and insurtechs should know about telematics?

Telematics plays a huge role in streamlining claims with accurate and timely first notice of loss and providing emergency assistance in the event of a crash. In both cases, time is crucially important, and telematics can recognise an incident and notify the right people within seconds of the event.