The super-connected nature of telematics systems, the rise of big data and the concern over how that data is being used (or abused), especially in light of recent NSA revelations, has highlighted one issue to the great unwashed: that there is an extremely fine line between protecting the interests of the public, and snooping on them. Where is that line regarding telematics?
During a roundtable meeting held by insurance industry publication Post, insurance company bigwigs in the UK decided exactly where that line is- it lies with mandatory telematics…and it is a line that even the typically money hungry car insurance racket is in no hurry to cross.
Simply put, insurers are concerned that any attempt at forcing telematics systems into driver’s cars will be met with hostility, and attempts to evade, or cheat the system.
Instead, industry experts are predicting that a softer approach may be what is needed. After all, insurance premiums and accidents have demonstrably been reduced in younger drivers who make use of telematics insurance systems, so there may be some validity in the idea that showing customers the cash benefits will encourage them to embrace the technology, rather that installing black boxes at gunpoint (figuratively speaking).
Richard King, chief executive of telematics giant Ingenie, summarized the situation: “The minute you make anything mandatory, people will spend most of their time and effort trying to find a way to fight or beat the system. We should make the benefits so obvious and apparent, without any curfews or restrictions, that people see the benefit and then opt in.”
Others believe that the solution may not lay with an opt-in agreement, but with an opt-out system- that is to say, mandatory installation unless the customer requests otherwise. This option would certainly help with the roll out
Many of the insurers think that the best way to show benefit to the customer is by offering so-called “soft benefits” with telematics based policies in order to sweeten the deal. One such soft benefit that is mentioned is the offer of free roadside assistance- but given that a lot of insurance companies already offer this, and considering the fact that roadside assistance services aren’t that expensive anyway, one wonders just exactly how many people will fall for this.
I can say from personal experience that when I was shopping around for insurance, the offer of 99 quid’s worth of free roadside assistance from Green Flag was not enough to tempt me into paying 3 grand for a fully comprehensive policy for a Peugeot 106. Given the generic nature of current soft benefits with existing policies, I would hope that future telematics-based policies would think a little more creatively where it comes to parting me from my cash.
Is the industry worried that telematics may level the field? How will they continue to swim in customers’ money?
Stephen Humphrey, business performance head of Insure The Box emphasizes the importance of not only giving the customer a better deal, but making sure that the customer realizes the deal works in the customer’s favor, rather than being a product that purely protects the insurer’s bottom line.
“What you have to balance is an offering that is appealing to the customer. That is where Aviva went wrong all those years ago- because it was trying to cut its risk” says Humphrey. “You have to give something that is valuable to the customer.” Quite right. Insurance premiums have not only been rising at some seemingly arbitrary rate, but have made it impossible for younger drivers to get on the road. Why would they be interested in saving money for the cruel master who constantly robs them?
Louise Williams, Hastings commercial manager for telematics, is quick to point out the issue of telematics outreach, and how aggregator sites (such as confused.com) aren’t exactly being proactive in spreading the telematics love. “They don’t sell any of the benefits and there have been lots of horror stories in the press around curfews” states Williams, “so the stigma is still there”.
So, based on insurance company’s reluctance to install mandatory black boxes in vehicles it seems that a more gentle approach is the only solution- a gentle approach combined with greater outreach activities to show the actual benefits of telematics policies.
But given the unrelenting rise of insurance premiums, especially against young drivers, it makes you wonder if insurers aren’t dragging their heels for other, financially motivated reasons.
After all, if I had a system which was guaranteed to make my customers shell out less cash for their premiums, maybe I wouldn’t be in such a hurry to push this wondrous new technology down people’s throats. That may sound like the rambling of a paranoid writer, but it wouldn’t be the first time that insurers have been investigated for taking advantage of customers. And until recently, premiums have been rising far beyond what should be expected when compared to the price of inflation, while accidents and claims have been dropping. Could it be that telematics may be the magic bullet that finally levels the playing field? A mandatory installation could certainly stamp out any unscrupulous dealings from the industry itself. It would certainly lay waste to the arbitrary pricing of some policies (where people pay more based on their profession, for example). I for one, certainly hope so. It would be nice to drive a car that is less than 20 years old just for once.
