There is a significant target market for telematics motor insurance products, a recent survey by IoT Insurance Observatory and the Automotive and Mobility Solutions team at Swiss Re has confirmed.
Telematic insurance products have been going through years of development and refinement, despite this they are not mainstream yet, Swiss Re explained.
But the survey, conducted in August 2022, revealed that the outlook of the current telematics market looks positive and shows clear directions in regards of customers’ needs and wants.
It also shows concerns around tracking and data usage. Feeling that data is shared safely and knowing how it is used, who can access it and for how long is a must for customers, analysts stated.
The survey was carried out in nine countries, including Canada, France, Germany, Italy, Portugal, South Africa, Spain, UK and the US; with a total of 10 000 policyholders, 2, 000 in the US and 1,000 in each of the other countries.
It found that, in all countries, younger individuals – mostly millennials (23–41 years old) and people in Generation X (42–57 years old) – are more attracted to telematic solutions, as well as more likely to recommend a telematics motor insurance app to a friend.
This group was named ‘telematic sponsors’, and it represented 54% of the sample.
On the other hand, ‘telematic detractors’, a category that represents 21% of the sample, are unlikely or not at all likely to recommend a telematics motor insurance app to a friend. This group comprised mainly baby boomers.
Swiss Re analysts said: “Although both groups (sponsors and detractors) have different opinions about telematics, they still prioritise the same two main factors when it comes to choosing their motor insurer: Price and service quality.
“In general, the survey shows the need for a phygital (physical + digital) approach when targeting telematics sponsors. In every phase of the policy lifecycle, telematics sponsors use both the insurer’s website and personal interaction; they tend to rely on a broker’s app/website or a comparison website, especially in the initial phase (ie to collect information and get a quote) and mostly use the insurer’s call centre when the policy is already active, ie to file a claim.”
Price preferences within the survey’s sample were not homogeneous. For example, 22% would like to receive a reimbursement of their monthly fuel bill based on their driving behaviour, and agree with a premium increase at renewal if the driving style was dangerous.
The above is only one example of several, but overall, the results showed that 89% of telematics sponsors opted for insurance policies that were other than traditional policies.
This, according to Swiss Re, confirmed the idea that usage-based pricing seems to be an option for creating an attractive value proposition.
Furthermore, almost 60% of telematics sponsors would accept to bear the risk of an increase in their motor insurance premium based on their driving behaviour, highlighting an openness not only to rewards in case of safe driving, but also to penalties in case of risky driving behaviour.
Even though price is one of the main buying criteria for policyholders, the value of additional services that telematics can offer is significant, analysts added.
The most attractive services for telematics sponsors are the ones around the crash, rewards for safe driving (available in different forms) and security services. This has proven to be true across all age categories and in all countries.
The top three value-added services for respondents open to telematics include: 52% would welcome to have an automatic emergency system in case of severe crashes; 52% would like to receive rewards for safe driving such as vouchers; and 50% would prefer an anti-theft device to track their car in case it is hijacked.
Even though the anti-theft device cannot be offered with an app-only telematics solution and requires the installation of a tag in customers’ cars, 73% of telematics sponsors would be open to having a hardware tag on the dashboard of their cars.
In the survey, participants were also asked to associate a monthly monetary value to the service of their choice. Telematics sponsors are willing to pay €16 on average in Europe and $25 in the US (vs €10 and $10 for telematics detractors).