By Nick Bancroft, Regional Motor Manager NSW & Qld
In the UK, where I earned my insurance stripes before emigrating down under in 2013, underwriters referred to detailed postcode maps to rate motor risks for as long back as I can remember. (Unlike Australia, UK postcodes cover areas as small as a suburban lane with a handful of houses.)
That all began to change in the UK about five years ago with the advent of high-tech gadgets like telematics black boxes, which provide insurers with detailed information about driver behaviours: where they go, when and how they behave behind the wheel.
This has in turned paved the way for a new wave of pay-how-you-drive underwriting principles based on personal data.
Fitted beneath the dashboard or somewhere elsewhere out of site, telematics black boxes are typically equipped with three key features:
- GPS to measure distance driven, speed, routes taken and times of day on the road
- Accelerometer to track the driver’s accelerating/braking habits and any sudden movements
- Gyroscope to record cornering speed.
From an underwriting perspective, this information can be used to provide a more accurate picture of an individual’s driving risks. The theory goes that the smoother you drive and anticipate traffic conditions, combined with avoiding driving black spots and dangerous time of day (late night/early morning), the less likely you are to have an accident.
There are also benefits from a claims point of view. The device can help to determine fault in the event of an accident and track down the location of a stolen vehicle. The technology can even be used to despatch emergency services when data transmitted from the black box indicates an accident has occurred in a remote location.
Another variation on this theme is a device commonly used in the US that taps into a vehicle’s on-board diagnostic (OBDII) system to measure acceleration, breaking, distance travelled and times of day on the road. The ‘Snapshot’, which has no GPS function, is usually used for a six week period to determine the driver’s risk rating. Based on the data, premiums can be adjusted down by up to 30 per cent.
In a similar vein, UK insurer Aviva has developed an iPhone and android app called Aviva Drive that uses a phone’s GPS to track a person’s driving performance for 200 miles.
So if these tools are so progressive, why have Australian insurers been slow on their uptake?
One key reason is that in places like the UK, where it’s predicted more than two million devices will be in use by 2015, and the US motor policies combine bodily injury and property damage whereas in Australia we have separate CTP and vehicle cover. Likewise, CTP is a highly regulated statutory class here whereas in the UK there has been a proliferation in recent years of what’s been dubbed as ‘crash for cash’ injury claims.
A combination of these factors has made car insurance prohibitively expensive for people deemed at higher risk, especially those in younger age groups.
According to a recent UK newspaper report from the Mail on Sunday, fitting a telematics black box can cut an annual premium by up to 25 per cent. When you consider a 21-year-old London driver pays upwards of £2500 to insure a Ford Focus 2006 model, the savings can be significant.
The great thing about telematics black box devices is that they can also be used to improve driving behaviours. Drivers can log into a portal to review their motoring performance. Likewise, employers can log into the system to monitor the driving habits of their fleet drivers.
Typically, the installation of these devices is not used to load policies but rather to provide discounts to drivers who are deemed to be better than average risks.
According to the Mail on Sunday, 15 per cent of insurance policies in the UK now offer a telematics black box option. Given the majority of Australian passenger vehicles will be fitted with telematics within the next three to six years, it will be interesting to see just how quickly the local market responds to this growing international underwriting trend and which insurers will blaze the trail.
What do you think of these high-tech devices and the impact they are having on underwriting overseas?