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Insurance Telematics is Poised for Mass Uptake October, 2013 BLOG POST


Telematics sales in OEMs are expected to grow, based on the surge of demand In 1996, General Motors - OnStar was the first to explore and come up with the telematics technology, but at that time, high cost of infrastructure investment and dismal demand from consumers kept telematics sidelined from the mainstream of the automotive sector. Slowly but steadily consumers start understanding the benefits of instant and constant connectivity, smart-phones have also fuelled the growth and demand of telematics. Most telematics setups can now use smart-phones to connect to the vehicle providing access to content from industries like media, banking and insurance. These combined reasons have added a fillip to the telematics phenomenon. Based on the surge of demand, telematics sales in OEMs are expected to grow in the future.

Telematics is the convergence of wireless communications

Source: Wipro Technologies

Insurance telematics is poised for mass uptake

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U.S. leads the OEM Telematics market while China growing rapidly Auto makers are increasingly coming up with embedded telematics technology in order to monitor safety and provide assistance in case of vehicle failure. Insurer’s UBI (Usage Based Insurance) program which incentivizes drivers having better risk profile is working as a growth driver for accepting telematics by consumers. Ford and General Motors lead the embedded telematics solutions and with other companies like Toyota/Lexus as well as the launch of new Mercedes-Benz services have increased the percentage of embedded solution.

Telematics sales – US (Mn units)

35 30 25 20

32.0

15 10 5

10.5

13.0

2010

2011

0 2017

In the United States, total telematics unit sales—including both OEM installed and aftermarket is estimated to be at around 13 Mn units in 2011, up 22.6 percent from 10.7 million in 2010.The overall sales are expected to reach to ~32Mn units in 2017. United States has the highest total availability of automotive telematics systems of any country in the world, followed by Western Europe. By the end of 2018, the proportion of new vehicles sold with embedded telematics is likely to reach 80% of cars on the road in the U.S. and 46% globally, according to iSuppli. China, which is the world’s largest car market since 2009 is on the path to become the leading country for embedded automotive telematics systems made by original equipment manufacturers (OEM), with sales expected to grow eight fold from 2012 to 2019. OEM-embedded telematics sales in China are expected to rise to more than 9.5 million units by 2019, up from 1.1 million in 2012.

Insurance telematics is poised for mass uptake

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Globally insurance telematics is gaining popularity As per the recent report by Tower Watson, a majority of auto drivers in the six largest motor insurance markets in Europe (France, Germany, Italy, the Netherlands, Spain and the UK.) have indicated they are willing to embrace telematics-based products. Interest was highest in Italy and Spain, where around 70% of drivers in each country said they were definitely or probably interested in taking out a telematics policy. USA’s UBI (Usage Based Insurance) market is estimated little above 1 Mn vehicles in 2012 and is expected to cross 5 Mn in next 5-6 years. US insurers are ahead of their global peers in terms of UBI offerings through telematics. For instance, State Farm is extensively expanding Drive Safe & Save program and is now available in nearly all states. It uses In-Drive devices from Verizon Telematics, along with General Motors On-Star and Ford Sync factory-installed options. Progressive also offers its program “Snapshot” in almost all states and continues its Snapshot Test Drive program, announced this past summer as a competitive bid to siphon customers from other insurers with a free 30-day trial. Allstate, Progressive and State Farm, each with their own UBI program, together represent nearly 37% of the U.S. auto coverage market, according to the latest data from the National Association of Insurance Commissioners (NAIC). Insurance telematics is increasingly gaining traction within the vehicle industry. Insurance telematics is expected to grow at a faster rate as it will no longer be an aftermarket value proposition. Conclusion Improved public perceptions and lowering of barriers will drive the growth of insurance telematics. Insurers will have to develop know-how pertaining to consumers’ data collected through telematics and the overall process involving telematics. Early adopters will certainly have the competitive advantage. However success in this field would not come so easily. Customer concerns about privacy and infrastructure cost are some obstacles which need to be overcome. Opportunity is huge as millions of people are available for telematics based offerings and implementation cost also dropping; auto insurers have no time to waste to make their move into the valuable market.

Source: Insurance Insight, Wipro, Isuppli, IHS Inc., Insurance& Technology, Tower Watson

Insurance telematics is poised for mass uptake

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Insurance telematics is poised for mass uptake