Has How You Drive become more important for Car Insurance?

Driving and Driver Behaviour have always been important for Car Insurers. Insurance is all about risk – and the best insurers will always be the best at providing premiums that most accurately reflect these risks. It has however become clear that all insurers are now climbing on board in seeking the best vehicle telematics solutions. When vehicle telematics are used by insurers to calculate risk we often refer to this as Insurance Telematics.

But why the sudden interest in insurance telematics?

We should perhaps not refer to this as “sudden” as the technology has been used for quite a while in the fleet management and logistics industries – it is only now more actively pursued with a focus to individual road users and vehicle owners!

It is important to understand that fleet managers have used state of the art vehicle telematics solutions for a number of years. I would like to quote from the Arrive Alive website on the objectives and advantages of fleet management:

Advantages of Effective Road Risk Strategies by Fleet Managers

The advantages of a responsible road risk strategy include the following:

• Effective control over costs such as insurance premiums, fuel bills and repair costs.
• Ability to make informed decisions about purchasing vehicles and training drivers.
• Less time on paperwork, lowered vehicle repair and maintenance bills
• Reduced likelihood of an employee being involved in an accident.
• Reduced running costs with employees driving more professionally and efficiently.
• Drivers less fatigued and healthy

Objectives of Fleet Safety Initiatives

• Vehicle accident prevention
• Accident investigation /analysis and reporting
• Improved safety on the road
• Driver education and driver alertness

The exact same technologies have been used highly effectively to reduce costs in the transport industry. Fleet Managers and the owners of the large truck companies have recognized and focused on the need to  protect their vehicles and cargo worth millions of rands and used the technology to achieve the above objectives.

Car Insurance and Telematics

Hollard with the Pay as You Drive product was perhaps the insurer who led the way in using vehicle data to calculate insurance premiums. Even though they might have focused initially more on the distance driven and used merely odometer readings for this, the products have been much enhanced to also include other tracking data.

In the past year we have found important announcements at presentations by companies such as Outsurance, Santam, Altech etc to the effect that insurance telematics have been recognized as the answer to combating ever increasing car insurance premiums.

Why was tracking and other vehicle data not used earlier by car insurers?

Tracking data was recognized earlier -but more as an anti-theft or anti-crime mechanism. Those vehicle owners who installed tacking systems in their cars were rewarded with reduced insurance premiums.

The clever people-  actuaries at insurance companies  – who crunch the numbers, had limited data to use when calculating premiums. They had to focus on vehicle driver data, the vehicle data, claims history and crime statistics. Insurance premiums were favourable to those who seldom claimed – even though they might have driven recklessly but with a lot of luck!! The same reckless driver might have been fired a long time ago by a trucking company who had all these reckless driving behaviour data at hand!

Technology has now been refined and developed to allow cost effective and affordable “black boxes” to be used in cars. It is now affordable and cost effective for both the vehicle owner and car insurer to promote the sharing of information that could result in reduced car insurance premiums! It also allows for insurance tailored to the needs and habits of individual drivers – The Safer YOU drive – the better YOUR insurance premium!!

Conclusion

We expect further close cooperation between insurers and vehicle telematics companies. More insurers will offer products that use driving behaviour data as an important ingredient in measuring risk – and more telematics companies will focus on further development of the technology to provide the best possible data cost effectively to insurers!

Also view:

Outsurance activates technology to reward safe driving behaviour

Vehicle and Insurance Telematics

What is Insurance Telematics and how will it impact on Car Insurance?

Pay as You Drive and Car Insurance