Market Trends of Insurance Telematics Industry
This section covers the major market trends shaping the Insurance Telematics Market according to our research experts:
Increasing Adoption of Usage-based Insurance
- Usage-based insurance calculates the insurance premium depending on the driver's behavior rather than a fixed amount like conventional car insurance. The distance traveled and driving behavior are two important factors in determining the cost of car insurance.The insurer uses data such as driving speed, acceleration rate, braking pattern, and whether you use the phone while driving to calculate insurance premiums.
- As the total cost of ownership for insurance telematics has decreased significantly over the last ten years and regulatory developments have enabled UBI, insurers worldwide have focused on telematics as the future of developing deeper client relationships. The main driving forces behind usage-based insurance are new data collection techniques, the development of embedded telematics solutions, the emergence of a new insurance ecosystem, a decline in accidents, and vehicle theft recovery capabilities, including those offered by mobile and hybrid solutions. These elements denote a shift in the market and are crucial for implementing UBI.
- According to a US auto insurance study conducted between January and April 2022, usage-based automobile insurance programmes have seen a dramatic increase that could save up to 30% on the insurance premium, depending on the operator or provider. However, the most significant fall in customer satisfaction is due to price increases. This negative satisfaction can be decreased by proactively informing customers ahead of time if the price increases.
- Through partnering with smartphone-based telematics companies that are industry leaders in big data to provide accurate results, UBI programmes analyze driving behavior accurately to offer fair discounts. For example, insurance SaaS providers like Zendrive use AI and machine learning algorithms trained by over 200 billion miles of driving data. To ensure that drivers are fairly evaluated and taxed, this data enables highly accurate scoring of driving behaviors such as hard stops, sharp acceleration, speeding, phone use, and hard corners, as well as the capture of overall mileage. Such technology advancements and partnerships drive the demand for the insurance telematics market.
The rising incorporation of the Internet of Things (IoT) into passenger and commercial vehicles is propelling the utilization of UBI along with cloud services in insurance telematics. The cloud makes it possible to access numerous device-related data sets when traveling. For instance, a parent can monitor their children's driving behavior. Furthermore, cloud services can be connected through third-party applications, enabling an enhanced customer experience and propelling market growth over the forecast period.
Europe Enjoys a Dominant Position in the Insurance Telematics Market
- The European insurance telematics market is primarily dominated by hardwired aftermarket black boxes, while self-install OBD devices represent the vast majority of active policies in Europe. However, several European insurers have recently shifted to solutions based on smartphones. The Italian insurers UnipolSai and Generali together accounted for over 50 percent of the telematics-enabled policies in Europe. Similarly, Admiral Group and Direct Line have strong adoption rates in the UK.
- Consumer engagement is now the focus of most insurance telematics programmes and will continue to be an essential topic in the near term in Europe. The European insurance telematics market is still controlled and dominated by insurers in Italy and the United Kingdom, with an estimated 4.3 million and 540,000 policies, respectively. All other markets have significantly lower uptake, with between 50,000 and 100,000 policies sold in Spain, Austria, and France, and between 10,000 and 20,000 policies sold in Benelux, Switzerland, Scandinavia, and Germany.
- The insurance telematics value chain spans multiple industries, including a large ecosystem of companies extending far beyond the insurance industry players. In Europe, automotive OEMs such as General Motors, Honda, BMW, Daimler, Hyundai, Toyota, and Stellantis are showing an increasing interest in using data collected by their vehicles in insurance applications.
Smartphone-based insurance telematics solutions are now offered on a broad scale in Europe. Prominent players such as LBS and Telematics Technologies are creating insurance telematics solutions in Poland's market in the fields of technologies used in UBI (both private and fleet cars), crash detection and reconstruction, and VAS for drivers. The EU market is following this trend of smartphone-based insurance telematics programs.
