Consumers want large discounts to switch to telematics car insurance: report
A majority (52%) of UK car insurance policyholders are aware of telematics insurance, which tracks vehicle behaviour electronically, yet take-up is still extremely low (3%), according to a new report from YouGov.
While 57% of policyholders see a premium based on actual driving data as a distinct advantage of telematics insurance, the report reveals that consumers are suspicious about what data collected by telematics might be used for.
Over half (51%) of policyholders believe that a disadvantage of telematics insurance is that their driving data might be used for marketing purposes. 41% believe there may be restrictions on when their car can be used in order to get the lowest premiums, and 39% state that the possibility of driving data being passed to the police without their permission in the event of an accident is a disadvantage.
Boosting interest in telematics insurance
Despite concerns over data collection, nearly a third (30%) of policyholders express an interest in using telematics or usage based car insurance in the future. The report suggests that the most effective way to lure potential telematics customers is for providers to offer premiums that either match, or preferably undercut traditional car insurance policy premiums.
The report finds that 21% would choose a telematics policy over a standard policy if the telematics policy matched the standard policy’s premiums. However, 50% would still choose a standard policy if all the telematics policy did was match a standard policy’s premium.
The data indicates that for telematics penetration to increase the most, insurers would have to offer significant savings over standard policies (i.e. just price matching is not enough). When policyholders were asked what the minimum annual saving would need to be in order to make them switch to telematics insurance, the average emerged at £136 per year.
Policyholders generally require an average 32% savings on their premiums in order to switch to a telematics policy. For those interested in a telematics policy, that savings drops to 26% - but it rises to 41% among those who fall into the not interested group.
Black box and regular premium adjustments are systems most likely to succeed
The report finds that 44% of the policyholders (and 64% of those interested in a telematics policy) indicate a preference for a black box telematics system over an app-based alternative. Also, 30% of all policyholders (37% of the interested) would want a monthly adjustment to premiums if they had such insurance, while 27% (32% of the interested) would want an annual adjustment.
Commenting on the report, YouGov Reports' Research Manager Tom Rees said: “As with most new products, telematics car insurance faces certain challenges in catching on with consumers. If insurance providers hope to get more policyholders to switch to telematics they must do their best to assuage concerns over what will be done with the driving data collected, and also offer flexibility around devices and when premiums are adjusted.”
