BY Capgemini
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What happens

Driver monitoring technology - more commonly known as telematics and which usually involves fitting "black boxes" into vehicles - had largely proved a marketing gimmick for insurers, with only a small number of mostly young drivers signing up to try to reduce their hefty premiums.

Insurers also admit the data provided by the boxes has been difficult to integrate into their insurance pricing models, but new mobile telephone apps that consumer can download to their handsets are streamlining the data collection process and boosting uptake.

Research from British Insurance Brokers' Association (BIBA) reveals the number of live telematics-based motor insurance policies including black box policies was up 25% year-on-year in 2016, while industry statistics show there is a 40% drop  in crash risk when a new driver has a telematics policy.

New machine learning techniques are also now advancing data analysis and easing the demand on data scientists, a professional class that is difficult and expensive to recruit, which should help hasten the widespread adoption of telematics.

so what?

Technical director of AXA Insurance

David is technical director of AXA Insurance, the world?s largest insurer by assets. He has more than 30 years? experience in general insurance, including as managing director of underwriting at AXA Insurance...

"Black boxes" provide the best telematics data, but new mobile apps, which perform much the same function and provide drivers with daily feedback, will spur telematics take-up in 2017 and beyond. Using these mobile apps is cheaper and more convenient for motorists and insurers alike. As use increases, insurers will obtain a broader and deeper data set that their machine learning programs can analyse, enabling this to be properly incorporated into calculating insurance premiums.

What's the latest on telematics?

Telematics is now beginning to gain some momentum - we recognise telematics is a positive development, but until now no one has had enough data to price things accurately.
The vast majority of solutions on the market would involve drivers being prepared to have a box in their car and in return we would give them what amounted to a random discount in the belief the box would make them drive more safely.
Telematics is still predominantly used by young drivers because there's an administrative cost to insurers and an inconvenience cost to customers so there had to be a big premium to start off with to justify going through this hassle to get a discount.

What do insurers do with the data generated by telematics?

Insurers now need to analyse the telematics data to find patterns that we can build into our pricing. This has been really slow going, but with machine learning we can set some parameters and let it run its own scenarios to find those patterns.
Machine learning can do the work of more than 10 data scientists, which is hugely beneficial because data scientists are not only very expensive but are also very hard to hire - everybody is trying to recruit them.
Machine learning means we can save our data scientists and actuaries to work on the final fine tuning of our pricing. From a pricing perspective, the use of data from telematics is going to accelerate.

Will mobile phone-based telematics prove more popular than "box" telematics?

If you have a mobile phone solution it's a really good way of giving feedback to customers. You don't just want to measure things, if you can nudge behaviours and influence people in the right direction then that is also a positive way to improve safety.
Mobile phone telematics can either operate solely using the technology embedded in the phone or it can communicate with a telematics unit fitted in the car. The big benefit is that it doesn't just give you a surprise at the end of the quarter that you've either got an insurance discount or not, you can look at it and see how you've been driving on a daily basis, maybe getting into leagues with friends and relatives.
The whole point is it encourages and rewards good driving. It's not just trying to grab the best drivers and price them appropriately, it's trying to improve the driving behavior of all your customers.

How widespread is this?

It's becoming more widespread. The problem is that obviously your mobile phone isn't fixed in your car and so it's easier to cheat or forget to leave it on and the whole point of telematics is that you need data all the time.
If somebody forgets to take their phone accidentally or deliberately, that's a big issue. There are solutions. There are devices that can automatically connect to your phone or send you some signal, there are units that fit into cigarette lighter sockets and also double up as a charger to encourage people to use them.

They will never be as accurate as something that's physically strapped to the vehicle but they're increasing in popularity because of the much better interface. The number of telematics offerings are increasing and the accuracy of the pricing, rather than the novelty marketing giveaway, seems to be increasing.

What is the outlook for telematics in 2017?

I hope to see telematics begin to move away from just the high-risk end. Because we can improve peoples' driving behaviour we need to find a way to appeal to the mass market. Some people are claiming that they've done that but when you look at the numbers the reality is it's still a niche segment. If telematics can make our roads safer we've got to be pushing it.

Who cares?

Motor insurance is Europe's largest non-life insurance sector, according Insurance Europe, the continent's official industry federation - €132bn of motor premiums were written in 2015, 38% of the non-life total. The average motor premium per capita was €221, while the average payout per capita was €170.

Telematics is integral to the development of autonomous cars. Various driver assistance components that will be part of the autonomous vehicles of the future are being installed in cars today, such as automated emergency braking systems, keep-in-lane systems and adaptive cruise control. Data from these features will enable insurers to better measure their safety impact and therefore write fairer premiums.
European safety regulations require some form of event data recording and signaling and much of this will soon be built into cars. Auto manufacturers are also negotiating with insurers as to the extent of the information to release.
Unlike the conventional no-claims bonus, drivers building up a good driving record through telematics with one insurer can't then take that to another insurer to get a discount, so for telematics to achieve true mass-market penetration insurers will likely have to standardise this data to allow for this portability.
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