There are plenty of stakeholders who can benefit from telematics, and the most obvious of which is the owner of a telematics product, says Cliff de Wit, Chief Technology Officer at Netstar, a subsidiary of Altron.
“But the next one is obviously the insurance company,” he continues.
The telematics industry is driven by the insurance industry, he says. And more recently a host of other institutions and industries are catching onto these tech-driven solutions. These include banks and other lenders of vehicle finance, as well as vehicle manufacturers and commercial fleets.
The Uptake of UBI
“If you look at insurance, the concept of If I drive less, I should be paying less is already established,” de Wit says. “That’s already built into a lot of insurance products.”
“They will phone you every year and you’ll make a self-declaration of how many kilometres you have driven, and they will then use that and build it into your next premium for your renewal,” he continues.
“But what I think is more exciting with vehicle telematics is you now have usage-based insurance (or UBI) products coming out.” This marks the end of the broader thumb-suck estimates of the premiums of yesteryear; now it’s about specifics.
“Now you can use telematics to measure what the vehicle is actually doing: How much it’s being driven, what times of the day, where it’s been driven…” says de Wit. “You can structure your premiums accordingly by looking at the risk model of the actual particular vehicle.”
The strange thing is this concept isn’t new; people have just been slow to pick up on it.
“UBI has been around for a while – most probably the best part of ten years, if not more,” says de Wit. “But the adoption rate is quite low.”
But like most industries, the forced introspection from the covid years has changed the way consumers – and potential consumers alike – operate within those spheres.
“I think with all the lockdowns and restrictions and so on, people started realising: Maybe my insurance policy is no longer relevant to the way that I’m using my vehicle,” says de Wit.
The demand for customised insurance solutions is snowballing. “We’re seeing of late that more and more insurance companies are starting to adopt some form of UBI or some derivative thereof,” he shares.
And to do this properly – to a degree where the consumer, intermediary and the insurer – all benefit from such a personalised set-up, you need accurate data.
“Of course, the more advanced companies will also look at the way how you drive – commonly referred to as pay how you drive.
This doesn’t just mean how often you drive, but the way in which you do so.
“They will also look at your driving style. And if you improve your driving style at renewal time, they will give you the benefit of better driving behaviour.”
Telematics and crime
Aside from rewards and fair deals and bringing down the costs, it’s essential in South Africa purely from an ESG (environmental, social and governance) perspective.
“Crime is still very prevalent,” says de Wit.
In the annual crime stats released towards the end of last year, vehicle theft was up nearly 7% year on year between the 2020/2021 and 2021/2022 reporting periods.
This is where the specifics of the latest tech also come into play. As useful as they are in reducing premiums, they’re as effective in tracking stolen vehicles.
With modern telematics we now have pinpoint accuracy in the GPS systems whether it’s a RF – or GSM-based system,” says de Wit.
The best part: this technology is effective. “That allows you to have a far better chance of recovering the vehicle,” he says.
Aside from being an undeniable bonus to the vehicle owner, this technology is in the insurance industry’s best interest too.
“With this higher success rate of recovering vehicles we now find more and more insurance companies working in conjunction with telematics service providers,” he says.
“They’re so confident in their technology they’re starting to offer a warranty on stolen vehicle recovery,” he adds. “So that is still a big driver of the technology.”
Stay ahead of the pack
The rapid developments in telematics technology can provide an edge to the intermediary.
“Insurance has become very competitive. Everyone is looking at ways to improve the quality and to reduce the risk of their book,” says de Wit. “Telematics can provide a means to do that.”
Up until recently, the barrier to these benefits was financially unfeasible for the average broker.
“With the very high cost of telematics, this technology was more in the domain of the very large operators in South Africa, and it was very difficult for the smaller insurance companies or smaller insurance brokers to access this technology to help them manage the quality of their books.”
But the demand for this tech has brought the prices down. “The good news is that a lot of insurances these days will provide a telematics platform as a service,” he says. “So, it gives an opportunity for brokers and so on to also start participating in the technology in an affordable manner – without all the bigger technology barriers.”
Finally, digital connectivity speeds up paperwork when it comes to eFNOL – electronic First Notification of Loss.
“For insurance companies, the efficient management of the claims process is absolutely essential,” notes de Wit says. If the insurer can get data from the vehicle via early notification that an accident has taken place and an indication of the severity of the accident, it helps to start the claims process sooner, he says.
Not only that; it also validates the accuracy of the claims process, he adds.
The accuracy of these eFNOLs have come a long way. “I think the early telematics technology wasn’t sufficiently powerful to differentiate between a real accident and, say, hitting a pothole,” admits de Wit. “Even when there was an accident of different sizes of vehicles or with vehicles at different speeds, the severity was difficult to determine.”
However, this is no longer the case. “The good news is that modern telematics devices have got very powerful microprocessors onboard and this now helps artificial intelligence and machine learning to be built into the device,” says de Wit.
“We can make a lot more sense of the underlying data and I think eFNOL services can now be at a level where they can be fully integrated into your business processes and they can be trusted from a data integrity point of view,” he concludes.
Ultimately, it’s not just the driver who benefits from a telematics system installed in their car – it’s the insurance industry, intermediaries and law enforcement who gain from it too.