How Telematics Change the future of Car Insurance?

The global insurance telematics market size is expected to reach USD 6.2 billion by 2025, registering a CAGR of 22.7% from 2019 to 2025, according to a new report by Grand View Research, Inc. Insurance telematics provide accurate data about driver behaviour and vehicle operations, which provides visibility and actionable data for claim processes. Additionally, the device helps in minimizing fraudulent claims and minimizes losses in this area. These factors are expected to boost the growth of the market over the forecast period. In addition, decline in the cost of supporting technologies such as wireless sensor network, GPS, and computer analytics is another factor contributing to the market growth.

Factors such as OpenStreetMap (OSM) project, plug-and-play devices, rising adoption of smartphone, and ability of smartphones to connect with on-board vehicles wirelessly using Bluetooth is further expected to propel the market growth. Advanced generation of telematics devices work effectively with fleets, business processes, and fleet managers. Therefore, it becomes easy for insurers to choose within a broad spectrum of data and feedback sources. Considering the long-term gains in the auto insurance sector, the market encourages mutual partnerships with telematics service providers that helps in eliminating the design and deployment complexities pertaining to IT and analytics services. Furthermore, logistics and support hold equal importance from the implementation perspective that offers high assurance in long-term maintenance.

Europe represents a steady market growth owing to significant presence of the telematics industry in Italy and U.K. Moreover, other regional markets in Europe such as Spain, Austria, France, Switzerland, and Germany have exhibited lucrative growth opportunities and resulted in a considerable market share owing to the growing automotive sector. The Europe market spans independent insurers as well as collaborative insurers that offer incentive programs based on varying degrees. Therefore, the value chain for insurance telematics in Europe beholds notable presence of key players with effective insurance programs to offer to their clients.

How we define telematics?

Telematics is an automotive communication technology under which various information of a vehicle captured and transferred via wireless networks to telematics service providers and its beneficiaries. It is a combination of

1. Communications (GSM, WiFi, Bluetooth, RF),
2. Location technology (GPS)
3. And, Engine Control Unit pushing the automobile health data.
4. Cloud Server

The Future Telematics

How Telematics is Transforming future of Vehicle Insurance?

The new ERA of technology has left no industry untouched. From automobile to aviation, every industry has adopted technology to come up with innovative products to woo their customers. Like other industries, the insurance industry as well has started implementing new technology in their business operations, making it easier for their customers to access and buy their products.

Talking about the vehicle insurance sector, it has seen a rapid transformation in recent years. From innovative insurance products IoT telematics-based premium calculation, technology has impacted this industry in multiple ways.

How It works?

Telematics works through a device installed in your car or phone app and uses GPS and other technology to monitor user driving. Telematics, or GPS box insurance, could help you become a safer driver, which in turn, could help lower your premium

The Telematics model initially gained momentum in the Auto insurance business for its ability to track vehicle usage through devices installed in the vehicles or apps on your smartphone. The new innovation of Usage Based Insurance (UBI) among car Insurers comes with four different types on the basis of driving pattern:

• Pay As You Drive Insurance – PAYD
• Pay How You Drive Insurance – PHYD,
• Control Your Drive Insurance – CYD
• Distance Based Insurance

Solution used for UBI (Usage Based Insurance)

• GPS Device based solution
• GPS Enabled Dashcam
• OBD II / CAN Bus Data
• Block Chain Technology
• SOS Alert
• On-board sensors

Benefits of Telematics Insurance:

Telematics in Auto insurance can remove a lot of friction in the entire insurance supply chain, especially in the areas of underwriting, customer servicing, and claims management. Telematics as a whole can lead to only one possible outcome. A much tighter coupling with your customer base and therefore, a significantly higher level of loyalty from your customers. Historically, the companies that flourished, have had a very loyal customer base. These customers have brought in other referral customers and the Insurers have grown through the goodwill of their happy customer base.

Other Benefits:

• Less numbers of accidents- Telematics insurance scheme helps to create awareness among the drivers and make them more cautious about their driving pattern and behaviour. Since the insurance company monitors and assesses their driving habits from live data, the drivers remain more conscious while driving on the roads. As a result, the accidents on the roads get reduced.
• Through this insurance scheme the drivers gain a hold on their premium rates. It is like they get the authority to decide how much they want to pay. If they drive safely at a lesser speed, they have to pay less premium and if they drive fast in a rough pattern without following road safety measures then they have to pay more as a premium for their car insurance policy.
• The buyers of the UBI policy will be able to save a good deal of money on motor insurance premium and can invest it in something else. Simply by instilling the habit of decent driving, the drivers can get significant reduction on the premium rate.
• While the asset-based motor insurance policyholders have to pay the full premium for their insurance, the buyers of the usage-based motor insurance policy especially those who drive their vehicles within the city limit will have to pay only for their usage.
• The usage-based car insurance policy in which the vehicle will be under constant monitoring is helpful in reducing the crime rate in the country. Also, this technology has made it easier to track and find a stolen car which is not possible in case of a traditional car insurance policy.
• It not only provides benefits to the user, but it is equally helpful for the insurers. This insurance policy enables the insurance companies to evaluate the risk factor associated with the vehicle and then based on that finalise the insurance cost.
• Reduction in CO2 level- Apart from reducing the accident rates on roads, this insurance policy will also play a significant role in reducing the congestion as well as vehicle emissions on the roads.

Pros of telematics insurance:

• Good drivers can receive cheaper rates based on their safe driving habits via usage-based insurance (UBI).
• Usage-based plans partially circumvent the potential unfairness of auto insurers pricing quote based on non-driving factors like credit score or location by taking into consideration relevant driving-related data.
• You may be incentivized to use your car less frequently, alleviating wear and tear, helping the environment and reducing the likelihood of a collision. 

 Cons of telematics insurance:

• Drivers with long commutes may not enjoy the benefit of lower rates from usage-based insurance.
• If your schedule requires you to drive at night, you could face higher-than-expected insurance rates. 

UBI (Usage-based insurance) providers in India

Bajaj Allianz General Insurance Company is a one-of-its-kind company which has launched the usage-based car insurance in India for the first time. It has recently introduced a new insurance policy named as ‘Drive Smart’ which at the time of the renewal of the policy will fix the insurance price on the basis of the usage details of the car. The tracking device and the service is currently available for free for individuals along with the add-on covers who will buy car insurance policies from Bajaj Allianz.

This telematics-based insurance policy is a welcome reward for the customers who showcase good driving behaviour. This particular policy will not only be helpful in lowering the cost but will be equally beneficial in providing safety and security to the drivers.

Three major aspects will be covered under this advanced insurance policy are:

• Decent drivers needn’t subsidise premium costs for the rash drivers
• The car, as well as the driver, will be safe against accidents and mishaps due to the safety measures adopted by the drivers
• Based on the good driving pattern and history the drivers will be able to save a good amount of money

Author:

Source of Data https://rasoolirfan.com/ , www.bankbazaar.com  and grand view research

Published in Telematics Wire