The five key trends defining financial services as we head into 2018
I have written extensively in recent weeks and months about the Fintech revolution in financial services and how it has brought the customer...
Telematics is no longer seen as an unusual part of the car insurance business in the UK. Over half a millions British drivers now have policies that are focused on the use of a telematics system in their vehicle.
A new study by the British Insurance Broker’s Association has revealed this astonishing growth in the use of telematics in the UK. The growth in the use of this technology in the past year alone is 40 per cent.
As I have mentioned in an earlier blog, the natural reaction to this monitoring technology from many motorists is to think of an Orwellian “Big Brother” monitoring how they drive, when, and where. But many motorists are actively choosing to give up this information because they believe that by using the technology to prove that they are a low risk, they can reduce their policy cost.
This applies particularly to younger drivers who would be heavily penalised using a traditional actuarial approach to pricing a policy. Many details can be captured by the system including speed, distance, acceleration, braking, and time of journeys. This gives the insurance company the ability to see how often the vehicle is used, when, where, and even how it is being driven.
Any driver who drives carefully, uses their vehicle infrequently, and ensures it is locked away safely at night is likely to find that by giving up their information they will be rewarded with a better policy price. The insurance industry suggests that there is a 40% reduction in crash risk in cars that have the system fitted – people genuinely change their driving behaviour when they know it is being recorded.
Of course in the long term as these policies become more popular and safer drivers all move to telematics systems then I expect those who do not want to give the insurance company information about the way that they drive will be excessively penalised. The assumption will become that those who do not want to be monitored must have something to hide.
We are yet to reach this stage at present, but with half a million motorists in the UK already choosing to be monitored I think that it must be close. We will move rapidly from a situation where most motorists could not imagine being monitored to where most are choosing it.
This is a complete transformation of the insurance industry in a way that benefits the insurers by allowing them to price risk more effectively and also for the customer that is prepared to look after their vehicle. In fact, the only losers are those who engage in risky behaviour – which logically should mean they pay more for insurance anyway.
What did 1000 car insurance customers say about their current provider’s customer experience?
Click here to view our league tables to find out who came in the top and bottom 10 now.