Telematics Watch: Why the cost-of-living crisis makes telematics more relevant than ever

Telematics insurance providers have long understood that selling pay-how-you-drive products purely on price is to miss the point, as the customers who engage most proactively are those who care about staying safe by understanding and improving their driving behaviour.

At the same time, to underplay the financial benefits of telematics products is equally detrimental, particularly as consumers face rampant inflation and are looking for ways to make ends meet. In this context, there is a need to highlight how telematics can help consumers not only access insurance at a cheaper price point, but also create savings for the longer term in a range of ways, including safer, and potentially greener, driving.

Promoting safer driving

Analysis of Igo4’s Wise Driving data shows that consumers who actively monitor their driving behaviour are reaping the benefits first and foremost in terms of safer driving.

The indicator we use to assess driving style is the driver behaviour score, accessible to consumers via their personal online dashboard and it is this that helps determine the premium paid for their policy.

A number between zero and 100 (where a higher score indicates a safer driver), the score is based on a range of factors, such as braking, acceleration, speed and night-time driving, enabling customers to assess the impact of each variable. In the case of Wise Driving, uniquely, the insurance premium is adjusted monthly, based on the DBS, creating the opportunity for regular rebates for safer drivers.

Driver rebates

The impact that awareness of being watched has on behaviour – known as the Hawthorne effect – is well documented, and the data backs this up. Typically, customers’ safety scores are higher in the early days of a policy term. As a result, 60 days after policy inception, most people receive a discount.

People’s driving score then tends to drop slightly and settle into what becomes their natural driving pattern. Even where we see evidence of poor driving, the majority of drivers will turn this around once it is flagged, whether through their online telematics portal or through more proactive provider intervention. For example, the majority of people who have a speeding event do not go onto repeat this once they are aware of its impact.

Over the course of the full policy term, two out of every three Wise Driving customers will receive a net rebate.

Proactive intervention by insurance providers can be key to helping them achieve this. For example, contact centre agents will telephone a Wise Driving customer if their DBS score drops by 10 points and provide feedback on how they can improve their driving. Igo4 also notifies customers if their DBS score falls below 30, giving them the chance to get their score above 30 within 200 miles of driving to avoid their policy being cancelled. This results in a quarter of people with a DBS below 30 going onto improve their score.

Crucially, policyholders with higher scores and rebates are more likely to renew, and the percentage of customers who renew trends upwards year on year.

Consumer confidence and value add

There are other ways in which providers can add value and contribute to this picture of growing renewals. For example, if a Wise Driving device senses that the vehicle in which it is installed is involved in an accident, a notification is sent to the FNOL provider, and they will contact the policy holder to check on their wellbeing.

If a car is stolen with a Wise Driving black box device installed, GPS technology can be used to confirm its location to allow the police to attempt recovery as soon as possible.

Initiatives like these, which demonstrate to people the quality and value of telematics data (accurate in 99.85% of cases), as well as the benefits of data sharing, help build trust in telematics products.

Greener driving

Most recently, Igo4 has applied telematics technology in conjunction with electric vehicle insurance to address ‘range anxiety’ and enable EV drivers to assess their driving score through the lens of assessing how ‘green’ their driving is.

In the context of rising energy prices, identifying changes that will allow them to go further once charged up brings financial as well as environmental benefits, and it is this financial narrative that we need to keep coming back to.

According to Consumer Intelligence data reported in 2020, 75% of consumers use price comparison sites when renewing motor insurance, highlighting the continued dominance of cost in decision-making. Even for EV insurance, Igo4’s survey of 300 EV policyholders showed that price remained key, with 40% reporting it as the most important factor when choosing insurance.

The upshot is that however wide-ranging the applications and benefits of usage-based insurance, we simply cannot afford to lose sight of the powerful incentive that cost savings represent, and in these straitened times, reminding consumers that telematics technology can help to generate those savings is more critical than ever.