A growing number of drivers in the UK are willing to consider a telematics insurance policy in order to lower their premiums, according to a new survey.
uSwitch.com found that the rising cost of car insurance premiums is driving motorists to consider “black box” policies, where premiums are calculated based on actual driving behaviour recorded via an in-car connected device. This allows insurers to more accurately assess risk for individual policyholders.
More than half (56%) of the 4,832 adults questioned said they are more likely to consider a telematics policy after the government raised Insurance Premium Tax from 6% to 9% of the total premium.
Saving money on their premium was the number one reason given by this group of drivers, although another fifth said they would never consider taking out a black box policy, citing privacy concerns.
Rod Jones, insurance expert at uSwitch.com, commented: “Younger drivers in particular can now prove their worth on the roads, having been penalised by their boy racer peers for years. The little black box can make all the difference. As the technology bases premiums on actual driving habits, not generalised data, careful motorists can enjoy a substantial saving.”
Jones also stressed, however, that privacy worries need to be addressed:
“For black boxes to appeal to all, the industry needs to convince motorists about how their personal data is used. Once drivers feel fully assured they aren’t trading their privacy for cost savings, black boxes will be well and truly here to stay.”
Meanwhile, a separate study by Fitch Ratings has predicted “a significant shake-up” in the motor insurance industry thanks to the growth of telematics and the development of driverless cars.
In the next five years telematics is expected to have the bigger impact on the industry, particularly in the UK, where take-up could grow rapidly.
The ratings agency cited recent results from UK insurer Direct Line which revealed that it has doubled the number of telematics policies in a year. Overall take up remains low, at about 2% of the company’s motor insurance policies, but among under-21s it stands at around 60%, reflecting the significant discount these policies can offer.
“The UK has some of the highest premiums for young drivers, and high rates of fraudulent claims, suggesting it could be one of the biggest adopters of telematics,” Fitch said.
In the longer term, Fitch believes that self-driving vehicles from companies such as Google and Tesla could “completely reshape” the motor insurance sector.
At the moment, the technology is still being developed and automated cars are not yet allowed on the road in most countries. But once these vehicles are introduced they could end up reshaping the insurance model because traditional and telematics policies are both based on the driver’s profile, which would become irrelevant for a fully automated vehicle.
Instead, a premium might consist mostly of product-liability insurance, or the liability could end up on the manufacturer, with insurance included as part of the purchase and servicing costs, Fitch suggested.
The potential long-term impact on insurers “could range from an increased commoditisation and simplification of motor insurance policies, to writing policies to cover an entire auto manufacturer or hire company, or the gradual shrinking of the motor insurance sector,” the ratings agency concluded.