The use of telematics in motor insurance has certainly managed to stay in the headlines as a hot topic of discussion for a good number of years.
In most of the advanced international markets the majority of motor insurance providers have played around with or considered incorporating telematics; either as a marginal addon (with rewards or other benefits) or through fundamental product overhaul (eg by transforming the pricing or risk costing to be predominantly based on driving behaviour data).
Although almost every market has some players focusing on telematics, its impact on the (personal lines) motor market has been slower than most predicted. In South Africa, the significance of theft and hijack prevalence has meant that the traditional view of motor insurers requiring or recognising the benefit of pure vehicle emergency tracking and recovery function still takes priority over the practical use of driving behaviour data for risk management and client rewards, although there are selected players that are successfully achieving the latter. As one of the local pioneers in practically implementing and giving customers the benefits of telematics, Oakhurst Insurance has focused its effort on SAP:
SAFETY Encouraging driving safety by making clients aware of driving behaviour that exposes them to increased risk, and offering tips and tools for reducing this risk, including cash rewards for good driving.
Assistance: Proactive Emergency Assistance, including immediate notification when the vehicle has experienced an impact, giving us the opportunity to do the following:
• Contact the client to assess the situation and send assistance if needed
• Call emergency contacts if we are unable to get hold of the client
• Provide immediate claims assistance.
PREMIUMS Automated analytics to identify clients that qualify for discounts as well qualitative use of data as an additional source of information when customising cover to suit clients’ needs. Our good driver programme gives clients the opportunity to compete against other drivers, rewarding the top drivers on the leader-board with 25% of their premium back in cash (good drivers can get this every month).
The most significant stumbling blocks for many insurers implementing telematics are the following:
DATA MANAGEMENT The practicalities of database management, storing real-time data and automating the ongoing refinement/calibration of exceptional events, require a unique mix or resources and skills.
CLIENT COMMUNICATION It is a tricky balance between giving clients regular constructive feedback on their driving behaviour and recognising the risk of excessive contact. At Oakhurst we have invested in a telematics portal that gives our clients access to view all the details, or summaries, of their own driving data, including visual tools on location and speed, and details of their performance on the leader board that is used for the cashback rewards.
The consensus is certainly that, locally and internationally, telematics will continue to grow in its impact on the personal lines market, but it is expected that the following variables will be most significant in steering the future:
THE DEVICE In South Africa the rationale is sound for continuing the current norm of telematics functionality being incorporated with the stolen and recovery tracking providers (with the traditional deep installed device), but the smartphone based (application) alternative is likely to grow in popularity, as it has internationally.
Two big uncertainties remain the extent to which vehicle manufacturers will embed telematics functionality (being either standalone telematics or partnering with the tracking providers), or whether standalone plug-in telematics devices will grow in popularity (like the ‘Snapshot’ device used by Progressive Insurance in the US).
DATA STANDARDISATION & PORTABILITY Building on the question of which device is used, the industry will benefit a lot from standardising the format in which telematics data is captured and stored. This will enable insurers to readily use data from different
providers (eg when a prospective client wants to present his historical driving behaviour while at a different insurer), ultimately empowering the customer to get the benefit.
PRODUCT Many insurers have (re-)designed their whole product offering around the use of telematics data, while others recognise it is best suited to cater for specific niches (a good example is the ‘ingenie’ offering in the UK, which uses telematics to enable temporary (short period) cover and competitive cover for younger drivers, in partnership with many of the leading underwriters in the UK).
Most of the above remains a chicken and egg scenario; eg will the large insurers or data providers/tracking companies drive the eventual standardisation of data, or will external (by an industry body) standardisation result in more insurers being able to offer telematics related product offerings?
At Oakhurst our top priority is to keep demonstrating value to clients that are part of our telematics programme, which will eventually make the case for change an obvious one.
ERNEST NORTH Oakhurst Insurance Company Limited