The introduction of telematics into the automotive industry would change the motor insurance landscape over coming years, with consumers expecting solutions tailored to their individual driving behaviour, business process services and software solutions provider The Innovation Group insurance managing executive Jonathan Holden said on Wednesday.

In its South African ‘The Future Now Report’, released on Wednesday, the organisation noted that the local motor industry was in the midst of an exciting and fundamental change in the way in which it evaluated risk, priced policies and interacted with its customers, with technology and data set to come together to redefine the insurer–customer relationship.

Holden explained that the introduction of telematics into the sector, such as applications monitoring driver behaviour, could be expected to impact on pricing methods, stating that this would lead to the customisation of policies to fit individual behaviour.

“Every individual has different habits and behaviours on which they deserve to be rated and rewarded.

“What that means is that the industry is moving away from the pooling of good and bad risk to subsidise each other, to individualised policy where, we predict in future, not only will the premium be determined by the habits and behaviour of the individual but also the level of cover,” Holden stated.

Lower premiums for consumers who drove well could, in turn, lead to more people taking out car insurance, Holden said, stating that this would be a positive development in the South African market where only about 35% of all vehicles were insured.

Innovation Group South Africa CEO Glen Mollink, meanwhile, noted that customised rates would place an additional responsibility on insurers, as good drivers would demand a lower premium; however, he added that, if insurance companies were well organised in terms of analytics, this would not lead to the destabilisation of the industry.

He further pointed out that, if insurance was priced according to driver behaviour, it would also force drivers to take ownership of their actions and incentivise better driver behaviour on the country’s roads.

The Innovation Group expected telematics technology to account for 40% or more of insurance policies over the next ten years; however, the company said the real value would be derived from the data telematics generated.

Holden explained that the extent to which insurance companies could collect more data, through telematics innovation, would make them more confident in their risk selection. 

“So the better you can select your risk and manage it, the more affordable the premium will become, the better you can control your loss ratios and more profitable you can be as a company.

“If every insurance company in South Africa was moving towards that the future would look great, and there would be a lot of money to be made, consumers would be seeing lower premiums and they would perhaps be experiencing higher levels of value for their money,” he said.

Mollink also noted that, while some consumers might not want their behavioural data accessed in such a detailed manner, global research had shown that about 40% of consumers were open to their driving being monitored if it would make a meaningful impact on their premiums.

However, consumers would always have to give permission for their data to be collected and would have to be made aware of exactly what data was being collected.

Further, through aspects such as social media and websites that compare the prices of different insurers, the power in the insurance space was shifted from the industry to the consumer, The Innovation Group found, stating that price comparison websites, such as Hippo in South Africa, were expected to become more prevalent in future.

“That is a quantum leap in the way consumers are spending their money and choosing their insurance products,” he said.

FLEET MANAGEMENT
Meanwhile, Holden said telematics and analytics was becoming an imperative for the fleet management industry, with data to be used to monitor vehicles and drivers.

In the report, The Innovation Group stated that South Africa was set to follow the European trend of using fleet management tools to improve driver behaviour.

Holden noted that some of the tools currently available to fleet management companies in this regard included breathalyser ignitions that required the driver to breathe into the device to start the vehicle, as well as at regular intervals while driving.

Further, the technology also existed to incorporate a fingerprint-based biometrics system into a vehicle’s ignition system, which would ensure that only the authorised driver could drive the vehicle.