Vehicle telematics have been around in one form or the other, for more than six decades now. Barring some success in the area of commercial vehicles fleet management, these haven’t achieved the desired success, especially in case of private individual vehicles. Why something that is beneficial to the whole mobility ecosystem is still not mainstream? What can the insurers do? Asia Insurance Review takes a look.
Vehicle telematics are a glass half-full for some and a glass half empty for the others. Most of the vehicle owners want to avail the benefits, including insurance premium discounts, that these technical systems bring with them. They, however, also feel that these systems impinge on their privacy and autonomy.
Technology aplenty
The present day vehicles are virtually computers on wheels. A public document released by Porsche Engineering Romania managing director in December 2021 said, “Cars contain a network of electronic control units (ECUs) and between 70 and 100 ECUs are installed in every modern vehicle. These ECUs control engine functions, regulate braking behaviour, monitor the air conditioning system and do a lot more. To carry out these and other complex functions in the car, these units require over 100m lines of coding and by comparison a Boeing 787 Dreamliner only has 14m coding lines.”
The technology in modern cars includes sensors, GPS, apps, infotainment systems, cameras and microphones. All of these can be used to remotely diagnose problems, call for help in an emergency, or enable or disable car functions through subscriptions. It can also produce valuable data for the insurance companies and marketers.
Initially, information was collected only about a handful of driving parameters. Today the list of parameters tapped by the telematics sensors in the vehicles has swelled greatly. The telematics embedded in the vehicles collect their share of information and data about numerous other parameters for the vehicle manufacturers.
Consumers not comfortable
The ability of embedded technology in the vehicles to collect reams of personal data has raised privacy alarms. A recent report by software technology company Mozilla gave the auto industry poor ratings for privacy, while highlighting that most car companies’ data policies reserve the right to share consumer data with third parties. This creates a security risk as well, with consumer data being stored in more and more places where it could be leaked or stolen, completely beyond the consumer’s control.
Cyber security and data privacy company Kaspersky recently came out with a report Is my car spying on me? based on a survey of 2000 drivers about their comfort level with the technology installed in their vehicles.
The Kaspersky survey revealed that 72% of the drivers are not comfortable with the idea of automakers sharing their data with third parties. Around 87% of the survey participants said automakers should be required to delete their data upon request and only 28% said they have some idea what kind of data their car collects.
Further, this large amount of raw and unstructured data can be useful only if it is collated, analysed and evaluated. The insurance companies collect data only to acquire information about the driving behaviour of the driver of the vehicle to enable prudent and sustainable motor insurance premium. An industry study revealed that majority of insurers have yet to give a thought on how to best utilise the data being collected by the vehicle telematics.
Poor awareness and missing trust
The installed telematics by the insurers are optional and the driver can join or opt out at any time. This is, however, not possible with the embedded telematics. It is difficult to opt out or switch-off these.
A study published by the UK road safety charity Brake and AXA Insurance in December 2023 found that more than a third (41%) of the drivers participating, turned off the features designed to keep them safe. Most drivers said they had switched off life-saving vehicle technology because they find it annoying.
The features that are generally turned off by the drivers, include safety features such as lane-keeping assistance and reversing cameras or sensors. The participants in the survey didn’t think the safety features made the vehicles any safer.
The study highlights a worrying lack of knowledge about the latest vehicle technology. This technology has the potential to prevent crashes and save thousands of lives if introduced in all new vehicles.
Backend infrastructure not up-to-date
Telematics, whether installed or embedded, are only the front end of the story. Technology will keep evolving by the day and installation alone would not serve the purpose. How does the data generated and recorded by this technology is analysed, evaluated and put to use for better risk management systems is more important.
Some insurers have been speaking about prudent auto underwriting for the users of telematic equipped vehicles, however, most of them do not have the infrastructure to perform these functions and deliver the right analyses.
As the surveys mentioned above show, a sizeable number of consumers are also not aware of all the functions of the telematics or what data they collect or how this data is put to use by either the insurers or the vehicle manufacturers.
Telematics are perhaps still looked majorly as a means to avail discounts on motor insurance premium. As high inflation levels and rising cost of living impact consumer wallets, saving cost becomes important.
A survey involving 2,791 auto insurance consumers in the US conducted between February and March 2022 revealed that as high inflation levels during that period were impacting consumer wallets and sentiments, many people were considering new technologies that could help them save money. The survey found that the number of those who opted for telematics rose from 49% to 65%.
Hence, to raise the importance of vehicle telematics it is essential that the drivers are made an integral part of the vehicle telematics ecosystem. Transforming the data into information that can be incorporated into action plans is also an important part of a successful telematics programme. The technology will work but may not be as effective otherwise. To achieve the required level of efficiency, however, the vehicle drivers and other stakeholders should all be on the same page.
Insurers need to be proactive
An EY Insights document How auto insurers can grow as a decade of disruption approaches published in February 2023 said, “Many insurers are not prepared. They lack the ability to incorporate mobility trends, Electric vehicles and automated vehicles based risk, repairability and safety projections and telematics data into their underwriting engines. They could be further bogged down by legacy distribution networks and policy administration systems.
“Most insurers today rely on telematics solely for risk selection and are not harnessing the full potential that could be realised with a comprehensive telematics programme. Basic driver data such as hard braking, speeding, hard turning and acceleration is tracked by most insurers, but advanced driver and contextual data such as distracted driving, weather and traffic conditions is not tracked or used in business decisions.”
No organisation, including insurers can put in place all technology and capabilities in-house. Insurers to ensure that telematics and the humungous data they bring in is put to good use, will need to closely collaborate with the various stakeholders in the mobility ecosystem. These could include vehicle manufacturers, vehicle repairers, vehicle safety research organisations and InsurTechs besides many others.
The telematics consumers will also need to be educated and incentivised to ensure they continue to use the telematics and adopt safe driving behaviour. The insurers will need to invest in data analyses, AI and ML and appropriate technological talent to be different and to ensure that telematics is brought into the mainstream. A