Drivers in the UK increasingly want usage-based insurance (UBI). 60% of drivers would take a telematics or ‘black box’ policy today to save money and improve safety, according to a study of over 3,000 motorists. Currently, insurers only offer this type of policy to approximately 5% of the population (typically the youngest, most inexperienced drivers) meaning that the vast majority of drivers who could benefit from lower insurance costs are missing out.
Not only is there a demand for telematics or black box types of insurance policies; they can help to improve driving skills. Road accidents remain one of the top ten causes of death worldwide, yet new analysis of UK Government road accident data (stats19) now suggests that black box insurance has led to a dramatic 35.32% reduction in collision rates in 17-19 year olds over the past six years.
LexisNexis Risk Solutions, a leading data and analytics provider to the insurance sector commissioned the study. In parallel, LexisNexis undertook its own analysis of road casualty data amongst 17-19 year olds in relation to telematics insurance take-up.
The study revealed that of those interested in taking a telematics policy today, 42% would buy for a cheaper insurance premium with 41% citing fairer premiums as the biggest benefit. Whilst for 21%, potentially becoming safer drivers is the best aspect of telematics insurance.
Graham Gordon, Director of Global Telematics at LexisNexis Risk Solutions says: “Our findings should provide a catalyst for the insurance sector to go beyond young drivers to offer the benefits of black box insurance products, such as the potential for money savings and improved driving habits, to a wider audience of motorists.
“Getting drivers confident in how their driving data is analysed is key. We need to be absolutely clear with customers about how their data is managed, who can access this data and when.
“If we can help more motorists get access to UBI, ultimately it may have a significant positive impact on driving behaviour and could even bring benefits along the lines we have seen with compulsory seatbelts, ABS and road design improvements.”
In particular, the LexisNexis study sought to understand how insurance providers could overcome the barriers to adoption by offering a choice telematics devices or solutions. For example, smartphone driving apps are likely to appeal to more experienced motorists, whereas a fixed black box, or self-installed device maybe more suitable for young and older drivers paying higher premiums due to their risk of an accident. Interestingly, while two thirds of respondents have no privacy fears about using a telematics insurance policy, those aged 65 and over were the most receptive to the idea.”
Graham Gordon continues: “We urge motorists to ask for telematics policies that will not only help them manage their costs but also monitor their driving behaviour. At the same time, we encourage the Government to start to seriously examine data which may show a correlation between telematics policy take-up and the reduction in road casualties in young drivers and do more to incentivise drivers of all ages to take up black box insurance. Wider availability and adoption of these policies can not only help to bring down premiums for drivers of any age but can also help create better driving habits across the board.”
Fast Facts from LexisNexis Risk Solutions Consumer Telematics Study
- 66% of motorists surveyed have no concerns over telematics, this rises to 71% in motorists aged 65 and over
- 60% would be interested in taking a telematics policy today
- 42% would buy for a cheaper premium
- 41% say fairer premiums is the biggest benefit of telematics insurance
- The ability to become a better driver is the best aspect of telematics insurance for 21% surveyed
- Stolen vehicle recovery ranked top reason for taking telematics (47%) followed by an upfront premium discount (39%)
- Those aged 65 and over saw the main benefit of telematics as the evidence that it could provide in proving their innocence in a speeding case or collision over and above insurance savings
- Those 65 and over were also the least concerned about their data being used to calculate their insurance premium
Insurance edge Comment:
In an era of declining car ownership, which is being replaced by car leasing/rental packages, usage based or even PAYG cover is bound to replace the traditional Fully Comp or TPF&T policies. The question insurers need to ask is how do we market this to drivers effectively? Many drivers don’t like the idea of being spied on, yet they demand cheaper insurance and a reward for loyalty, plus a lack of claims.
Squaring that data circle is the key to building a healthy car driver insurance database, based on a kind of passport system, which accurately tracks a driver’s true risk, based on usage, claims history, driving ability, speeding, risky behaviour etc.