Telematics potential: January 2017

With reforms, fraud and automated technology taking headlines this year, the area of telematics has quietly been growing – but is it still a long way from reaching its potential?

The number of live telematics policies reached 751,000 in 2016 according to BIBA – up from 455,000 in 2015, and 323,000 in 2014.  But as a percentage of the total number of motor insurance policies issued, this is only a rise from 1.7% to 2.8% in terms of volume.

The value of having a telematics based policy is becoming more evident, and this may help numbers to increase more rapidly in the next few years.  This is most apparent with young drivers, who can save up to £1,000 by using a telematics policy.  This is proving to be not only of benefit to the policyholder, but also to the insurance industry and society as a whole.  Research has shown that by having a telematics based policy, the risk of young drivers being involved in an accident can reduce by up to 40% - this adds up to a reduction in associated cost of £370m over seven years.  It needs to be a vital part of the campaign to improve young driver safety (more on that here).

The benefits of telematics is also being linked with a call for the Insurance Premium Tax (IPT) to be reduced, or given a break completely, for those who use telematics policies (which in the main is young drivers).  The costs of driving can prove prohibitive for 18-24 year olds, and therefore an IPT break could be a good incentive for those struggling to have their own car.

The technology and data capabilities are enormous (as are the privacy issues) and proof of this is starting to appear in the market.  For example, telematics data has been used in court as evidence, disproving a claimants’ statements of how an accident occurred.

The sector has also been earmarked as being central to the Government’s future proposals on automated vehicle technology.  It was highlighted in the recent consultation that data and data sharing will be pivotal, especially when determining whether a driver or vehicle is at fault for an accident.

To answer the question of whether telematics is a long way from reaching its potential – yes, it probably is. But that potential is enormous, and momentum is small but gathering pace.  We will return to look at telematics in more detail throughout the year.