How will telematics impact the insurance industry?
If you are on the road between 8 a.m. and 9 a.m., you're driving at one of the most dangerous times of day, according to National Roads and Motorists' Association (NRMA) Insurance data reported in the Guardian.
Insurance providers are starting to use real-time information about drivers to get a more accurate picture of their behaviours behind the wheel. This data, collected through telematics, enables insurers to empirically determine the cost of coverage.
While telematics is primarily being used for auto insurance, it could be adapted for use in business insurance and other products.
The future of telematics
Telematics is poised for strong growth in Australia; An Insurance Business survey found that 64 per cent of respondents believe that telematics will have some impact on the Australian insurance industry in 2016. Given the novelty of telematics, it is likely that this will only increase with time.
There will be roadblocks ahead for telematics, both in the auto insurance industry and other insurance applications that may develop. According to a Deloitte report, only 26 per cent of drivers would allow their driving habits to be monitored, while 27 per cent conditionally agreed based on the size of an insurance discount. This could lead to a conflict between insurers and customers, as Deloitte speculated providers would be unlikely to return to less accurate assessment methods.
Telematics in other insurance sectors
There are a number of insurance products that could see an integration with telematics as the technology progresses.
- Farmers insurance could use telematics to collect specific and individualised data about local conditions.
- A number of monitored factors could change the way business insurance policies are drawn up.
- Daily conditions in a landlord's property could be monitored for changes in risk.
While the potential applications of telematics are mainly theory at this point, it will be interested to see how the insurance industry will change as a result of the technology.