The potential of telematics-based motor insurance is not being realised and there is a real need for the industry to raise awareness as to the benefits of this technology, if this potential is to be met.
According to Mintel’s latest motor insurance report, motorists show an interest in wanting a policy that rewards good driving behaviour or skills (49%) or a policy that reflects their low mileage (48%). Motorists are also interested in having their driving monitored to see the effect that it has on their car insurance premium (36%). However, paradoxically, only 1% of consumers use telematics technology, the same proportion as last year.
Part of the answer lies in motorists’ low estimation of their own driving ability, with only 36% believing that they are a better than average driver. This is likely to make drivers disregard the option of using telematics before they have measured their own driving ability. The very concept of ‘driving ability’ is ambiguous, and confusing for consumers to comprehend. Companies selling telematics technology should help to clarify exactly what constitutes good driving, or what telematics measure.
Older drivers show a greater willingness to have their driving monitored to see the impact it might have on their premiums. However, older consumers are already paying lower premiums, so the potential cost savings of using telematics are lower. They have less incentive to start using telematics. In contrast, younger drivers, who could benefit the most from telematics, are the least willing to use the technology. Younger drivers are also less likely than average to consider themselves to be better than average drivers (27%). Therefore, helping this group to understand more about what is involved in this technology will be crucial in expanding use.
Using telematics could not only help younger drivers to save money on their premium, but it could also help them to become better drivers by providing feedback on how they have been driving. Monitoring driving behaviour through telematics could help influence young motorists’ decisions, for example they may drive more slowly, or not manoeuvre corners as sharply. If motorists are to use telematics they will need to be nudged into doing so, by providing incentives or by arranging the free fitting of telematics technology for younger consumers.
Alexander Hiscox is Senior Financial Analyst at Mintel. Alex has extensive experience within financial services in the wrap platform, fund supermarket and retail banking sectors. Alex works closely with financial advisers to develop an understanding of the market from both consumer and intermediary perspectives.
