Last month saw the international launch of the first telematics based private motor insurance policy created in a significant collaboration between the UK office of insurance technology specialist SSP and international telematics solutions expert Wunelli.
Editor: There’s been a lot of talk about telematics and usage-based insurance over the last two years, but for any of our readers that aren’t entirely clear can you outline what it is?
Rhys: Usage-based motor insurance is simply where the policyholders’ driving behaviour data is transmitted from a telematics black box device or other in-car devices, such as a smartphone app, to insurers. Insurers can then monitor, analyse, score, and adjust premiums up or down as appropriate according to the driver’s behaviour.
Penny: The data lets insurers see where you drive, when you drive and how you are driving, enabling them to give a more individual premium.
Editor: Why a smartphone app and not a black box?
Rhys: Until recently, using a hardwired black box was the only serious option for collecting driving data, but it was also expensive. However, as smartphone operating systems have advanced in recent years they now provide a low cost data collection tool, allowing much lower risk, lower premium drivers to be targeted, opening up telematics products to the mass market.
Penny: The advancements in smartphone technology and the advances we’ve made in creating apps that are more robust at collecting and analysing data mean that insurers are confident enough to use apps for the purposes of policy administration. SoteriaDrive is our latest innovation, it’s 99% accurate compared to a black box and allows us to develop a driver footprint.
Editor: Driver footprint?
Penny: Every individual has a driving footprint unique to them. This footprint is determined by a combination of origins and destinations and driving styles. Once we know the footprint – usually once 200 miles have been driven – we can be 99% certain the data delivered by the app will be accurate.
We determine the footprint by going through a series of steps to validate the GPS readings, analyse the mileage and ensure the data is legitimate. By comparing these results with driving behaviour parameters such as speed, acceleration and braking, we can footprint a driving style. The final step is to pull all this information together to create a score on both the driving behaviour and data accuracy confidence level.
Wunelli has been working with underwriters on the development of SoteriaDrive as we understand that without their confidence in the trip data recorded, there will be no discounts available nor will there be any use for the data at point of claim.
Penny: Wunelli guard the trip data and apply industry recognised standards to its collection, application and storage.
Editor: So who owns the data collected via the app?
Penny: Driving behaviour data is personal data so under the Data Protection Act it belongs to the driver and can’t be given to anybody without the permission of the person it belongs to.
The Trip Data Controller will be Wunelli – we have over four years experience of capturing and managing the data effectively for some of the leading names in the insurance industry.
Editor: Telematics based private motor is still a fraction of the private motor market, even in the UK – why do you think a product from a high street broker will make the difference?
Rhys: You’re right, usage-based insurance has been around for some time without really taking off. But there’s now plenty of evidence of its potential, and that it will play an increasingly important role in the industry.
Penny: Up to now, telematics based policies have, in the main, been targeted at specific sectors because of the high cost of data acquisition via black boxes. Because of this it’s only been economic for high premium sectors such as young drivers. However, with the advent of more accurate data collection capability using smartphones there is massive potential to sell telematics based policies to lower risk, lower premium drivers.
Editor: So, from a practical point of view, how exactly will the broker select SoteriaDrive for their client and on what basis would the broker select one insurer over another?
Rhys: Brokers will be able to obtain a quotation via their existing SSP system from a panel of SoteriaDrive insurers in exactly the same way as they do for any other motor or household policy. Each insurer will set their own terms and conditions for the policy as usual and brokers will select SoteriaDrive via their SSP system. Ultimately it will be down to the price from that insurer and the cover that the customer is looking to obtain.
Penny: Once the policy is incepted, the broker will provide a link for the client to download the SoteriaDrive app to their smartphone. This will record their driving behaviour and allow feedback on driving performance and any adjustment to the premium.
Editor: With the insurance market remaining challenging, how many SoteriaDrive policies do you expect to see by the end of the year?
Rhys: I don’t think our UK office know the answer to that. This is a new initiative but industry and telematics experts have been involved in the product and process design so we are very confident. However, more importantly we need to find a way forward for high street brokers, not just larger brokers and insurers. The brokers we partner with have proved highly resilient and have consistently delivered good quality business to their insurer partners, but we need to support them further by giving them with the tools to compete, and this will!
Ultimately this is about driving down premiums for certain sectors of the market that are prepared to have their driving behaviour monitored, but we are trying to emphasise that there is also the opportunity to improve your driving and your safety.
Penny: This is a tremendous opportunity for independent brokers to stay close to their clients’ needs and respond to the market, and I’m sure those that do will continue to thrive, whatever the market throws at them.
Editor: So the final big question – this product is not yet available in South Africa. When do you think it will be launched here and do you think South African brokers and insurers have the appetite for the product?
Rhys: Definitely within the next 18 months. I think that during 2013, telematics will reach a tipping point as a number of large insurers that have been piloting usage-based insurance policies over the last two years come to market with new propositions and technology costs drop. Like anywhere else in the world, if insurers playing in the motor market in South Africa are to remain competitive, they need to implement more targeted underwriting and develop niche products. This is the type of solution that will help them do that. Research says that although today there are currently only around 300,000 telematics -based motor policies, this could increase by 700% to over 2.15 million by 2015, or nearly 10% of the motor market.