Around the world, drivers have long been familiar with satellite navigation devices to help them find their way around. But now, GPS technology is also providing new directions for the marketing and underwriting of motor insurance. This month’s InSights looks at the latest developments in the usage of telematics, or “smartboxes” to enhance the competitiveness of motor insurers, crossing a range of strategic objectives.
Smartbox technology is being used by a small number of ICMIF members to help them meet their business objectives – reducing theft loss ratios; differentiating themselves from competitors – and social objectives – encouraging high-risk, young drivers to improve their driving skills; increasing road safety.
Recent or emerging external challenges also provide compelling reasons for insurers to consider smartbox technology:
Soaring motor premiums combined with falling household incomes have decreased the affordability of motor insurance and increased the price-sensitivity of customers. Drivers with a low-risk profile (whether real or perceived) in particular will seek ways to lower their premiums to reflect the risk they present, with one of the latest ways being to opt for pay-as-you-drive insurance.
In December 2012, European insurers will, in accordance with the European Court of Justice’s gender equality ruling, be unable to segment male drivers from female drivers when underwriting new non-life insurance policies. Female drivers, who generally present a lower risk than male drivers, will no longer enjoy the lower premiums offered by virtue of their gender. Pay-as-you-drive insurance may be an attractive option for female drivers who want premiums that reflect their individual risk.
In the second edition of InSights, we identify the potential business benefits of smartbox technology, and raise the important questions that managers need to consider when assessing its viability for their organisation.
We are setting up an online group to enable ICMIF members to share their experiences, questions, comments, articles and research relating to smartbox technology, too. Full details are included in this latest edition of InSights.