TELEMATICS-based insurance is still a niche, representing only around 2.5% of the South African retail vehicle insurance market. As the technology gets better and cheaper, insurers expect its popularity to grow.
There are about 12-million customers with telematics-based policies around the world. This will increase to 100-million by 2020, according to a recent global study on usage-based insurance by consultancy group Ptolemus.
Ernst and Young global telematics working group team member Kavi Pather said telematics devices were historically bulky, expensive and difficult to install, limiting their viability to usage in the commercial insurance market.
Devices are now much less expensive, more reliable and, in some cases, easier to install. There are also alternative tracking options available such as the use of mobile phone technology.
The technology has advanced enough to allow short-term insurers to begin offering new insurance products such as customised monthly premiums along with automatic crash detection and emergency roadside assistance.
Mr Pather said telematics-based vehicle insurance enables greater transparency as consumers will be able to see the reports and measurements their premiums are based upon. They can then work to improve their driving and monthly premiums or rewards.
Customised pricing is a key benefit of telematics insurance for consumers, Discovery Insure head of technical marketing Philippa Wild said.
“As a starting point, telematics enables better drivers to pay lower premiums, especially those better drivers in traditionally perceived high risk groups, like a young male driver driving a high performance vehicle.”
Most telematics motor insurance products offer clients ‘pay-as-you-drive’ and ‘pay-how-you-drive’ options. ‘Pay-as-you-drive’ products calculate premiums based on the distances driven each month, rewarding consumers who only travel short distances.
‘Pay-how-you-drive’ products use more complex measurements in order to evaluate overall driving ability, incentivising responsible driving with cheaper premiums or rewards. Insurers are likely to evaluate driving behaviour such as harsh acceleration or braking, cutting corners, travelling long distances, travelling in unsafe areas or at night, speeding, swerving and using your mobile phone while driving.
Some consumers remain concerned that the information may be used to refute a claim if, for instance, the driver was speeding at the time of an incident. Ms Wild said most insurers simply use this data to incentivise more responsible driving, and that consumers must check the terms of their individual policy.