Blog: Trak Global's Nick Corrie on why telematics is more about crashing, not driving

Aeroplane crashes are thankfully rare events. In 2019, there were 86 crashes, including the Boeing 737 Max disaster in Ethiopia. Grim news footage of the aftermath of such disasters is invariably followed by the search for the black box flight recorder, to determine the cause of the accident. 

That iconic ‘black box’, which had its genesis in the aviation industry, has now become the standard descriptor for motor telematics; black-box insurance routinely describes telemetry that determines when, where and how customers drive in order to reduce premiums.

While black boxes are the meat and potatoes of the UK’s young driver market, technology has evolved fast. Sensor ‘agnostic’ providers use devices like on-board diagnostics-II dongles, smartphone tech and original equipment manufacturers-embedded solutions to achieve the best result for insurers and customers alike. 

In the UK, less than 10% of motor insurance is delivered via connected products, but many of its fans hope the aftermath of the pandemic will bring connected insurance into the mainstream, something us ‘telemangelists’ have been predicting for years.

However, it will be some time before the post-pandemic mobility picture clears and its clear the tipping point for connected insurance has been reached.

Although Covid-19 is still with us, usage figures show that the number of car trips being made have exceeded February levels. With this ‘normalised’ road use, accident frequency will increase and claims costs will rise again. Economic pressures will doubtless give rise to a surge in fraudulent claims, too. The much-needed respite that claims departments enjoyed during lockdown will have been shortlived.

It’s clear now that the much-mentioned ‘new normal’ is a long way off; that people are going to carrying on crashing their cars for many years to come; and that the ‘black box’ is rooted in crashing, rather than driving.

With this in mind, surely the ubiquity of crashes presents the opportunity for a ubiquity of assistance, delivered via a small black box that sits under the windscreen and pairs with a smartphone app?

Insurer claims departments are well-oiled machines. Disrupting that machine with ‘new’ technology is hard, but putting a piece of hardware in every insured car to provide first notification of loss alerts and crash detail would mean that liability and damage repair decisions could be made so much more quickly – and fairly.

In claims, time is money, so resolving claims quickly and fairly would bring huge cost benefits. Motor claims cost insurers in the US and Europe roughly $360bn. Extensive use of telematics data in the way claims are managed has over the last eight years achieved near double-digit combined operating ratio improvements for some capacity providers.

This gain sits outside of any additional risk selection or in-life management benefits that a usage-based insurance approach can bring. Extrapolate that COR equation to the European and US markets and that equates to nearly $30bn reduction in claims costs. For a capital outlay of a few quid per policyholder, that’s a hefty return for the insurer, and a better claims experience for the customer.   

While demand for UBI is on the rise even without the accelerant of a game-changing global pandemic, analyst research suggests that motorists who are prepared to share driving data with their insurer in return for discounted premium remain a growing minority. But the majority of motorists would want technology on their side if it guaranteed the quickest, fairest settlement when they make a claim.

For £1 per month, it’s a lot less than a dashcam, and research suggests that more than one in four UK motorists have bought one of those. Such versatile technology is a small expense loading for an insurer, but a huge opportunity for them to connect better with customers, who after all pay insurance for help in a crash. If that help were to come more speedily and more efficiently they’d really value it.