There are now many emerging business models that rely on data passing through several platforms, so as to relate in real-time to alerts, new types of insurance products and useful customer services. We have apps for monitoring the smart pet, smart bag or handbag, the smart home with a raft of new alerts and services on the way, and soon to come, apps for elderly care and home automation.
Yet probably the definitive and longest-serving example of data flowing between sensors and machines in the Internet of Things (IoT) is the motor telematics insurance sector.
From our recent research* at LexisNexis Risk Solutions, we discovered that the majority of UK motorists are open to adopting usage-based insurance (UBI) programmes, when the real benefits are explained. The data quality, data availability and hardware cost has been improving many times over since the early period of telematics and retro-fitted vehicle black boxes.
So it is probably one of the great questions for the future of insurance: why has growth of the UBI market continued at a fairly slow pace? Why has telematics insurance marketing tended to get fixated on the young driver segment? What will it take for the insurance industry to spread the benefits, which are becoming fairly well understood in the wider population?
The typical consumer is, after all, is simply interested in trusted and reliable information and a set of product benefits.
In a recent study we surveyed a representative cross-section of just over 3,000 UK motorists on their attitudes to telematics insurance. The results showed the different attitudes to telematics and tracking technology between the genders and different age groups.
We found that consumers generally respond positively to the benefits of a telematics policy: cost savings are the primary motivation, followed by the peace of mind of vehicle tracking, anti-theft benefits, and the use of data to support the motorist in case of an accident or legal claim.
The survey also showed there is a most positive response to telematics benefits amongst the younger and older drivers. However when this translates into actually opting for a telematics policy, this tends to get lost on the older drivers, who appear to be more apathetic to making the switch to new technology.
The inference from this insight is that whilst young motorists are clearly motivated by the savings on their premium in the first few years of driving, older drivers also perceive the benefits, but there is less of a purely financial imperative to switch.
- 8% of drivers said they are ‘definitely’ interested in a telematics policy today
- 15% of drivers said they are ‘definitely’ interested, but with a price discount
- 2% of drivers said they are ‘definitely’ interested, but with help in becoming a safer driver
Overall, 42% of respondents stated that they ‘would be willing’ to buy a telematics insurance policy with some conditions.
Our survey shows there is immediate interest in switching to telematics insurance for over 3 million drivers (8% of the total 39 million UK driving licence holders), with qualified interest from another 6 million motorists. This is over and above the current 0.8 million telematics customers estimated in the market.
So by definition there is a need to identify new types of segmentation and the right ways to communicate value to new customer segments.
More awareness required
Some 50% of the drivers we surveyed said they had some level of concern about how their driving information will be used.
Another 22% said they had general concerns about being monitored whilst driving and 19% were concerned that driving information might get passed onto third parties such as the police (which usually can only happen in the process of court proceedings, and is decided by a judge).
In a previous blog we have commented on data protection, the role car manufacturers in information security, the principle of ‘private by design’, and how they’re already setting rules for distributing data from the connected car.
Clearly there is still a large majority of motorists who are positive or neutral to telematics, but who have unanswered questions, and are not being served in the market.
This research shows the middle age groups were more polarised in their views, but still with interest in cost savings, and with a lower interest in services for becoming a better driver. Neutral views increased amongst the older age groups.
The benefits of telematics for vehicle security and tracking resonated well across most of the spectrum of drivers. But it seems there is still an awareness gap to be filled, or at least a gap in making the right choices more clearly defined for policyholders.
For more insights from these research results download the LexisNexis Risk Solutions white paper ‘Moving the Addressable Usage Based Insurance (UBI) Market’.
*The data mode of collection for the LexisNexis Risk Solutions Telematics Consumer Survey was 3,025 online interviews via the Consumer Intelligence Panel. Respondents were 50% males, 50% females and representative of the driving population across seven age groups (17-19, 20-24, 25-34, 35-44, 45-54, 55-64, 65 and over) and social demographic groups A, B, C1, C2, D, E.