New technologies such as event data recording and telematics can improve profitability in the motor insurance business. With an increasing number of insurers around the world rolling out innovative programs in product development, claims, and risk management, carriers should take a careful look at the business case for in-vehicle recording.
The market for motor insurance in the industrialized world is indisputably large, with an estimated 500 million cars on the road in Europe and North America. Yet for many industry players, profits remain elusive. Technologies such as event data recorders, telematics, and on-board video recorders offer an unprecedented level of insight into drivers' behaviors in an industry where more information often means a competitive edge. In a new report, Vehicle Data and Telematics: What Does the Future Hold for the Insurer? , Celent examines these emerging in-vehicle technologies: who's doing what with them today and the factors impeding as well as supporting widespread adoption.
With a number of devices now available, insurers have the opportunity to collect driver data with as much or as little granularity as they desire. They can monitor vehicle location, speed, and driving times, or they can collect data on specific, narrowly defined events, such as hard braking. With better underlying data and the accompanying ability to price risk more accurately, insurers can roll out new types of products, often targeted at customers previously considered uninsurable. Information collected in the vehicle can also be used during the claims process. However, the factors preventing the widespread adoption of these technologies are great indeed, and the overwhelming obstacle is the ubiquitous business issue of cost.
There are several approaches insurers can take toward in-vehicle data collection, each with its concomitant challenges. "The appetite for such technology is likely to remain only in commercial fleet insurers, where the business case stacks up," says Catherine Stagg-Macey , a senior analyst with Celent's insurance group and author of the report. "Application in personal motor insurance will remain limited to niche products aimed at small segments."
Innovative motor insurance programs are in the early stages of development at a number of insurers across the globe. "Regional conditions will play an important role," says Ashley Evans , co-author of the report and an analyst with Celent's insurance group. "The European Union's eCall program, which will soon require a form of telematics in vehicles for emergency services, may encourage the application of wireless GPS technology in additional arenas, including insurance. In the US, without a similar federal initiative, there may be more of a focus on black boxes and event data recording."
The report provides case studies from North America, Europe, and Asia. Insurers profiled include Progressive, UNIQA, Aioi, and Hibernian. Vendors profiled include Injury Sciences and DriveCam.