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Insurance Telematics Reality Check: It Really is Gaining Momentum

We identified telematics – the use of integrated technologies in vehicles – as a trend for Canadian insurers in 2012.  Several recent reports are suggesting that the trend is gaining momentum, and a tipping point may have been reached.

Phil Gusman recently reviewed  a Celent report, entitled “Telematics-Based Insurance: Has Its Time Finally Arrived?” in PropertyCasualty360.  According to Gusman, the report suggests that insurers are not only overcoming concerns that have impeded implementation of the technology, the insurers are finding new potential uses that transcend risk selection and underwriting, such as fraud detection.

According to Gusman, this reinforces recent comments made by Moody’s that the implementation of the technology is progressing at such a rate that insurers who are lagging will “find themselves insuring shrinking pools of poorer drivers—who will appear to be normal drivers if traditional rating factors are used.”

Writing in Insurance & Technology, Stuart Rose, global insurance marketing manager at Cary, N.C.-based SAS, argues that the quality of the underwriting will increase substantially as telematics driven data allows more precise underwriting based on experiential data.  And this is increasing uptake within the industry. Rose concludes that “The technology is still in its infancy with regard to its application in the field, but its adoption rate is dramatically increasing and it has the potential to revolutionize the auto insurance industry.”

According to Gusman, Towers Watson thinks that uptake within this insurance industry passed a tipping point in 2011.  He quotes Robin Harbage, director of usage-based insurance for Towers Watson: “Until now, a few key players were pushing quite hard. Today, almost all major players have a public program or internal pilots.”

Gusman concludes from these elements: “True innovation is rare in the insurance industry, but telematics may be a genuine example. The technology is still in its infancy with regard to its application in the field, but its adoption rate is dramatically increasing and it has the potential to revolutionize the auto insurance industry.”

The 2012 Insurance-Canada Technology Conference will feature a panel of experts 2012 Insurance-Canada.ca Technology Conferenceentitled: “Telematics: Learning to Drive in the New Landscape”.

 

 

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