Now Available: Insight Report: Technology in Action - A Roadmap for Insurance Telematics

Telematics has redefined the way motor insurance products are designed and marketed. As a disruptive technology in the insurance industry, insurance telematics offers huge growth potential as well as many challenges for motor insurers. It has brought the pricing of motor insurance to the discretion of customers, redefining the customer experience. Although insurance telematics is mostly used as a niche product to target high-risk drivers such as young motorists, its popularity during 2009-2013 has brought it into the mainstream of motor insurance business. Insurers, as well as government and vehicle manufacturers, are promoting initiatives to make telematics a mass-market product. Insurance telematics is widely seen as the future of motor insurance.

Demand for insurance telematics expected to soar over 2013-2018
The insurance telematics market is in a nascent stage. The US, Italy and the UK are the early adopters of insurance telematics products, and Italy is currently the most mature market with a penetration rate of 4% at the end of 2013. The estimated global sale of insurance telematics products increased to 4.5 million as of December 2013, with an estimated market size of US$4 billion in terms of gross written premium. The potential of telematics technology to offer a win-win business relation between insurer and policyholder is driving rapid growth of insurance telematics products in the European and US markets. Global sales of insurance telematics products are projected to grow at a CAGR of 80.20% over 2013-2018, and the subscriber base is expected to reach 85.5 million in 2018. The growth in the insurance telematics market over 2013-2018 is expected to be driven by increased adoption of telematics products in the UK, the US, and Italy.

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Value-added services expected to define the future insurance telematics offerings
Initial growth in the insurance telematics market will be mostly driven by price discount models. However, with growth in the market and mass adoption of insurance telematics over 2013-2018, price discounts will no longer be helpful in differentiating insurance telematics products. In countries where premium rates and profit margins are low, insurers will not be able to offer great discounts on usage-based insurance products. Insurers are expected to offer telematics-based value-added services for a minimal fee, or free of charge, to attract customers and differentiate products from those of their competitors. Key value-added services that can packaged with insurance telematics products include provision of driving feedback and professional driving instructions, automatic eCall (alert call to emergency services in case of vehicle collision) and bCall (breakdown call) facilities, roadside assistance, emergency services, theft-tracking, remote vehicle monitoring and diagnostic services, traffic and navigation services, fleet management, and infotainment services.

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