Telematics a ‘new paradigm’ for insurers
The impact of telematics was the binding thread running through the fourth Annual Motor Insurance Summit, held at the Waldorf Hilton in London yesterday.
Delegates from the across the industry gathered to hear presentations from a wide representation of speakers, almost all of whom said a telematics tidal wave is sweeping towards the sector.
They warned that ignoring it is simply not an option for insurers who, according to product director at Carrot Insurance Ed Rochfort, have a stark decision to make: ‘Innovate or die.’
He added, ‘I’d go as far as to say that telematics represents a new paradigm in car insurance. You put your telematics glasses on and suddenly you can see things you couldn’t previously see. You start to see behaviours that very strongly correlate to risk, and you can start to act on them to protect your underwrites.’
Some insurers might look at telematics’ sluggish uptake in the last 10 years and consider holding fire. But Martin Williams, managing director, Octo Telematics, said he expected interest to accelerate, with penetration in the UK jumping from 2.3% to 17% in 2020 – or 4.5m active customers.
He believes this surge will be driven by a drastic reduction in the price of the telematics device (from nearly £200 to £25), while customers will increasingly be attracted to the safety elements telematics offers.
As for insurers, he believes the benefits are myriad: ‘Typically we’re seeing a reduction in the cost ratio for insurers of about 30%. More importantly, it’s getting rid of the bad drivers, the accidents waiting to happen.’ He added that with improved risk assessment and reduced claims, there were ‘huge benefits both at the front end and back end, we’ve just got to embrace it more.’
Direct Line Group [DLG] introduced its own telematics solution three years ago. It’s a constantly-evolving and improving product but has already gone from 10,000 customers to 78,000. Dan Freeman, head of motor development, DLG, said, ‘We’re excited to be at the beginning of something we believe could become a lot larger.’
However, he admitted that it can be difficult to know where to start when it comes to incorporating new technology, and said the first priority was remembering who it was for.
He said, ‘You need to focus on the customer when looking at innovation. It’s a truism, but how many of us really do it?’
He also emphasised collaboration – being honest about your strengths and weaknesses as a company and then developing suitable business partnerships to plug the gaps. Essentially though, companies need to set clear objectives for what they want from the new technology, and then take the plunge.
He said, ‘The best way to learn if something is going to work is going to try it. There were problems, and we had to iron those out and persist, and persist and persist. And you need to be opportunistic. Be open to new ideas and be good at filtering out the rubbish ideas; if you have a clear vision and clear objectives that can be done easily.’