There are two rivers flowing through insurance today: the need for personalisation and the demand for a simple user experience. Telematics is the merging of these rivers. In this shortened version of an article on the role of telematics in insurance, Belinda Felix from Netstar and other industry experts explain how telematics is transforming the industry right before our eyes.
Vehicle telematics was originally widely used from a specialised fleet need to track heavy load vehicles and delivery drivers, to something increasingly used by the vehicle insurance sector today. Though some drivers are wary of giving their insurance provider detailed access to their driving habits, many are happy to trade off their concerns for the increased benefits and ease of use the technology offers.
There are essentially five broad benefits to using telematics for insurance:
- More accurate premiums
- Ability to reward (and retain) low-risk drivers
- Accident prevention
- Quick, seamless claims
- Rapid accident response
More accurate premiums
For insurers, the benefits are substantial. It is a revolution in the making for an industry that has historically had to rely on educated guesses to rate risk. As Deloitte explains in a recent paper, Auto insurance telematics, The three-minute guide, “Telematics is a potential game-changer for auto insurers, allowing them to decrease reliance on proxy-based measures—such as demographics and credit scores—and incorporate real-time driving behaviors to more accurately measure driver risk.”
Telematics takes traditional insurance a step further. Belinda Felix, General Manager for Insurance Markets at Netstar, says, “Traditionally, insurance premium calculations were based on where the vehicle ‘sleeps’, the make and model of the vehicle, and the age and gender of the insured driver. Insurance telematics measures ‘how you drive’ in addition to the above factors, and a consumer’s premium is based on their individual risk behaviour.”
Data is the new gold and telematics is the motherload. With accurate data based on behaviour, policyholders gain some control back over their insurance premiums. As Phumulani Mazvabo, Business Development Executive at Khanyisa Risk Services, explains, “Telematics helps us reward the effort and not the result.”
Telematics also allows insurers to offer adaptive insurance. Insurance that adapts to real life situations with minimal input from the policyholder. Take the rapid escalation of events over the past few months: “Working from home during the Covid-19 pandemic has made more people review their insurance policies and their premiums, thus you will see more insurance product offerings like ‘Pay as you drive’ and ‘Pay how you drive’,” says Felix, as people working remotely are proactively paying lower premiums by keeping their cars safely at home in their garages.
Among the benefits for an insurer is attracting ideal clients by merely having these types of policies on offer. “These policies generally attract lower risk drivers. Usage-based insurance (UBI) has changed the landscape of the motor insurance market and insurers slow to take up the opportunity are at risk of losing clientele to competitors that offer UBI products with premiums aligned to ‘good drivers’,” explains Felix.
Read the full version of this article in the Netstar CPD Hub. Apply for your sponsored 6 CPD hours by following this link https://gifs.africa/netstar-cpd/. Remember, the CPD deadline is around the corner and seats are limited. Register today!