Consultant Wouter Joosse monitors the latest (technological) developments and innovations for FRISS. For six months he tested telematics with his own car. He became intrigued by the growing possibilities and by the potential benefits it offers the insured as well as the insurer.
Telematics insurance uses real-time data to monitor an insured’s driving behavior and calculates the premium accordingly. This requires a box with software and sensors to be installed in a person’s vehicle and of course, software to process the data. The sensor technology registers location, speed, acceleration and the G-forces that impact the car when swerving or turning corners. This provides the insurance company with insights such as braking and accelerating behavior of the insured and the actual and average driving speeds. It also enables reconstruction of vehicle positions and trajectories in accidents, making it a lot easier to verify claims. And data is more reliable than witness accounts.
I tested telematics myself over the last six months. There are several Dutch insurance companies that deploy this technology at present and they award points for good behavior. Bad behavior gets points deducted. After a year, the insurer adjusts the monthly premium based on the number of points the insured has scored. That system appeals to me. With telematics, a driver can show his or her insurance company their good driving skills and get rewarded for that quickly. It is a faster, more transparent and verifiable system – and more fitting to our times – than giving discount for claim-free years. I can see this developing into a system where the insurer adjusts premiums monthly on the basis of points scored and/or distance travelled.
The app is what makes it really interesting. Because I have easy access to my data, I am now very aware of my driving behavior. This makes telematics more than a tool for the insurer, it also becomes a very interesting application for the insured. The point system makes it feel like a game. Points are deducted for speeding, braking or fast acceleration. I enjoy getting a high score, so I try to speed less. One time I had to brake hard, because a car in front of me stopped suddenly. That moment was clearly visible in the app and could be explained easily. Insurance companies will be able to compare such anomalies to regular driving behavior to determine what kind of driver you are.
Current terms and conditions of the policy will state that data is only used to calculate the premium. Honest people will not be worried by the fact their location and routes are registered, as this is already possible with the mobile phones we carry. But insurers should check how long the data is stored. And if they don’t want their movements logged, then they can have the box removed. This will of course affect their premium as the whole idea behind telematics is that rates are based on actual behavior.
When more insurance companies start to offer telematics as a service, will it replace the system of claim-free years? Will the insured really benefit from sharing their data with the insurance companies or is it just a way for them to gain more insight into their clients? Time will tell. At least telematics has made me more aware of my own driving behavior and that is a benefit to me.