While telematics-based auto insurance has been around since the 1990s, adoption has been slow in the personal auto insurance market. In the past, many consumers were concerned about privacy issues, data regulation and plugging a dongle into their vehicles. For other consumers, the potential upsides seemed greater than any risks.
Today, it seems the tide is turning. Now, driving data is often collected by smartphones or connected cars rather than dongles, and digital adoption across all industries has somewhat eased consumer concern about data sharing. Rising premiums and deadlier roads are also causing drivers to take a closer look at their telematics insurance options.
Inflation Causes Drivers to Reconsider Usage Based Insurance
Whether it’s for a fleet owner or an individual driver, one thing that makes telematics appealing is the potential for cost savings.
These days, saving money is especially appealing. High inflation has been stretching budgets. At the same time, auto insurance rates have been rising. According to Bankrate1, the average car insurance premium averaged $1,771 in 2022. In 2023, it rose to $2,014 – an increase of $243 a year. That’s on top of the rising cost of gas, food, and pretty much everything else.
Many people are finding new ways to cut costs. Telematics has emerged as one possibility. According to TransUnion2, high inflation drove telematics adoption in the first quarter of 2022, with the number of consumers who accepted a telematics offer increasing by 33% compared to the end of 2021.
Roads Have Become Deadlier
In recent years, U.S. roads have become deadlier. According to the NHTSA3, 42,915 people died in motor vehicle crashes in 2021. This is a 10.5% increase compared to 2020, when 38,824 people died. Traffic fatalities haven’t been this high since 2005.
Modern cars are equipped with many sophisticated technologies designed to make people safer – from automatic braking to blind spot warning systems. However, safe driving habits are still critical. IIHS4 says speeding increased during the early months of the pandemic, when people were stressed and the roads were emptier than usual. As traffic volumes returned to normal, risky driving habits persisted.
Car makers have already embraced technology that makes cars safer. Now we need technology that makes drivers safer. That technology is telematics.
Telematics Programs Can Provide the Feedback Drivers Need
People don’t always know they’re dangerous drivers. Even though more than 90% of crashes result from human error, AAA5 found that 73% of U.S. drivers think they’re better-than-average drivers. This means many drivers are overconfident about their skills.
Telematics programs can provide the impartial feedback drivers need to accurately assess and improve their driving. These programs often look at things like speeding and hard braking. With telematics, not only will drivers find out they’re unsafe; they may also learn they are no longer eligible for safe driving discounts – which may be a much-needed incentive to drive safer.
Some telematics programs even provide driving scores with suggestions on how to improve, which can be effective in changing the way people drive. According to the Insurance Research Council6, 8 in 10 people who participated in telematics said the program helped change their driving habits.
Telematics Programs Can Save Lives
Telematics can also help if a driver is in a crash. According to Digital Insurance7, telematics technology can detect crashes and proactively help drivers with emergency response and other supportive action. Twenty-one of the top twenty-five U.S. auto insurance companies will be doing just that through services offered from Cambridge Mobile Telematics (CMT), a leading telematics technology provider.
During a Connected Claims USA 2022 session ‘The Pillars of Telematics Value in Claims’, Cornelius Young, VP Claims at Cambridge Telematics, explained that CMT’s Drivewell Platform takes massive amounts of raw sensory data and turns it into insights for crash assistance, claim automation, risk scoring, and behavior change. It delivers customer value via proactive real-time services (e.g., emergency response, accident tow, etc.) as well as proactive digital engagement and triage. Carriers are able to proactively reach out to crash victims via their insurance app with data prefilled for the claim from telematics and other contextual data, enabling quick triage to the right adjuster at the right time with the right data.8
Commercial Telematics Is Paving the Way
Although personal adoption has been fairly slow, commercial fleet operators have proven eager to adopt telematics.
According to Transport Topics9, motor carriers have been struggling with rising commercial auto insurance rates for years now. As insurers deal with inflation and nuclear verdicts, it seems likely that rate hikes will continue.
Telematics programs can help fleet operators reduce costs in multiple ways:
- Improving safety and reducing claims by tracking drivers.
- Improving efficiency and reducing fuel costs by tracking routes.
- Facilitating proactive maintenance and reducing downtime by tracking vehicles.
Many fleet owners have embraced telematics because they want to gain these benefits. However, there’s still room for growth. Commercial Carrier Journal10 says small fleets have lagged behind large fleets in adoption. Nevertheless, the commercial sector has widely accepted telematics, and usage is growing rapidly.
According to Fortune Business Insights11, the global commercial telematics market was worth $34.79 billion in 2020. By 2028, it’s expected to grow to $158.31 billion – an impressive compound annual growth rate of 21.6%.
Stay tuned for our next article: ‘How Connected Cars Are Transforming Telematics Adoption’.
Drivers who choose telematics-based insurance may also value digital payment options. One Inc provides convenient, cutting-edge technology to enable secure inbound and outbound digital insurance payments. Learn more.
- Bankrate - https://www.bankrate.com/insurance/car/the-true-cost-of-auto-insurance-in-2023/
- TransUnion - https://www.marketwatch.com/guides/insurance-services/telematics-insurance/
- NHTSA - https://www.nhtsa.gov/press-releases/early-estimate-2021-traffic-fatalities
- IIHS - https://www.iihs.org/news/detail/pandemic-lockdowns-made-rush-hour-speeding-risky-driving-the-new-normal
- AAA - https://newsroom.aaa.com/2018/01/americans-willing-ride-fully-self-driving-cars/
- Insurance Research Council - https://www.prnewswire.com/news-releases/driver-telematics-programs-face-privacy-concerns-irc-study-finds-301690408.html
- Digital Insurance - https://www.dig-in.com/news/cmt-drivewell-fuelstar-programs-offer-safer-driving-rewards
- Connected Claims USA 2022, Reuters Events.
- Transport Topics - https://www.ttnews.com/articles/carriers-hoping-see-relief-after-years-insurance-premium-increases
- Commercial Carrier Journal - https://www.ccjdigital.com/technology/asset-tracking-management/article/15306767/smaller-fleets-lag-behind-in-telematics-adoption
- Fortune Business Insights - https://www.fortunebusinessinsights.com/commercial-telematics-market-106314