Telematics demand in South Africa is keeping pace with countries such as the US and Singapore, here’s why.
The telematics industry is growing exponentially in South Africa, not just in terms of market penetration, but also in the variety and complexity of its products as the technology becomes available to a wider audience at a lower cost.
Industry experts at Netstar, a leading telematics and vehicle recovery services provider, say that telematics adoption in South Africa is growing compared to the rest of the world, and various reports back up these claims.
The mature SA market
Berg Insight is a vehicle industry analyst and consulting firm in Gothenburg, Sweden, with a special interest in automotive telematics. The findings in their latest in-depth analysis show that the penetration rate of telematics in South Africa is comparatively high compared to other countries. And this is backed up by reports from McKinsey and Company, a global management consulting firm. In their report, the firm defines the telematics space in South Africa as a mature market, noting that South Africa has the third highest penetration rate in the world, after the US and Italy.
The impact of usage-based insurance
The findings in the McKinsey report show a link between South Africa’s demand for vehicle telematics and demand in the country for usage-based insurance (UBI), coverage based on the actual distance a customer drives and other driving variables, such as location, speed, and driver behaviour. “UBI relies on telematics devices to collect vehicle-operating data that insurance companies can analyse to price insurance policies more accurately, assess claims and even recreate accidents for analysis,” McKinsey notes.
As a country with a growing demand for UBI, the person on the street is more familiar with this concept of processing logistics, distribution and insurance claims, all processes widely used in the northern hemisphere.
“Vehicle telematics is being used extensively by insurers and OEMs in Europe,” explains Paul Visser, principal product manager at Netstar. “’Pay as you drive’ and ‘how much you drive’ are the most popular models,” he adds. These models have been central to telematics technology merging with insurance and are a result of the expansion of the Internet Of Things (IOT) technology into our everyday lives.
IOT is an umbrella term that describes the use of devices with sensors that collect, process and exchange data. This flow of data-processed information between devices and the actions that follow are evident in telematics technology.
McKinsey and Berg Insight note that South Africa’s marketplace has all the ingredients for UBI to flourish, but Netstar’s Visser says there are more evolved and technologically advanced aspects of user-based insurance to keep in mind.
More than mere recordings
When it comes to vehicle telematics, it’s not just about recording how much you drive and basing your premiums on this data, but also how you drive. “There is a shift to the ‘Pay how you drive’ model,” says Visser.
The “how” element is crucial and shows the advancement of telematics technology. It’s no longer just about the wheels turning but also about the safety of the passengers, the fuel costs, the efficiency of the route and the service plans of the engine. All of which has helped vehicle telematics gain traction in SA.
Netstar has developed several scoring models that track drivers’ behaviour. “These include time of day driving and over-speeding scores by road-speed bands,” says Visser. This is a level of data-driven complexity that ensures the longevity of a vehicle, its driver, its passengers, and its cargo.
More affordable telematics
The research shows that South Africa shares the stage of top telematics-using countries with Singapore, Italy, and America, and has left experts interested in the drivers behind this growth in South Africa, something of an outlier among the above developed nations.
According to the Berg Insight report, South Africa has a “relatively mature telematics market” despite the country’s weak economic performance. So, what’s the reason behind the uptake?
This enthusiasm for telematics and dependence on data suggests an increase in affordability of telematics technology. Suddenly, and thanks to a well-documented steady rate of refinement and innovation on the global telematics sphere, the perks of user-based insurance are available to everyday South Africans.
Commercial use
One of the prime uses for telematics in vehicles on a business level in South Africa is in fleet management.
The team from Berg Insights predicts that the number of active fleet management systems in SA will grow at a compound annual growth rate of 12.2% and will culminate in 3.8 million telematics units on our roads by the end of 2027.
All of these will be driven by telematics technology and, perhaps most crucially in our country’s context, these facilities are becoming more and more affordable. Rickard Andersson, the principal analyst at Berg Insight, ranks Netstar as being one of the top players in the South African fleet market.
One of the significant findings in McKinsey’s report is that the rapid demand for telematics in South Africa is voluntary, whereas in other countries, such as Russia and Mexico, anti-theft technology is compulsory.
Even though it’s up to the vehicle owner’s discretion, the uptake is significant compared to countries that enforce UBI. Recently released figures by the South African Police Service (SAPS) showed that over 2 500 truck hijackings had taken place in the first three months of this year, and it’s understandable that safety on the roads is on many a South African’s mind.
New tech, new opportunities
“The majority of the insurers are keen on utilising first notification of loss (FNOL) as a service,” says Visser.
FNOL is the initial report made to an insurer following a significant event such as theft, loss, or damage to an asset. Typically, this first notification will come through before any formal claim is filed. After this, a series of procedures must occur before a settlement can be made, and it’s this often-arduous back and forth that creates friction between insurer and insured. Telematics can remove this hurdle.
Using telematics technology, the owner and the insurer can get access to live, real-time feedback, and correct quantitative data that supports the event. Now, first notifications of loss can be instantly observed and documented, which allows for quicker processing and more accurate premiums.
The development of DaaS
Data-as-a-Service (DaaS) is the culmination of telematics technology and IOT-driven technology. It’s a data management strategy utilising the cloud to deliver data storage, integration, processing, and analytics services, all through a network connection.
The cloud aspect is critical, as it means that applications don’t have to run locally on devices. And thanks to low-cost cloud storage and bandwidth, DaaS has become infinitely practical in today’s data-driven marketplace. A recent research report released by Market Research Future has predicted the Data as a Service industry to grow to over $67 billion by 2030. Netstar, for example, offers DaaS offerings which record critical data from day-to-day vehicle use.
Benefits of DaaS include lower operation costs, deep business insights, fast paths to innovation and improved risk management. In the vehicle safety and insurance context, because of South Africa’s steady adoption of telematics technology, one can access a DaaS model that allows clients to stream and consume secure data. The emphasis is on security, as the model is compliant with the POPI Act and the GDPR.
For a vehicle-user subscribed to the DaaS system, the benefits include reducing fraudulent claims, better tracking of assets, reducing costs through improving efficiencies, better driver behaviour, and prevention against accidents and losses.
South Africa is holding its own as a mature player in the telematics standings, despite its economic challenges. Telematics is no longer a foreign concept here, and since it’s a part of vehicle-based commerce, it is only natural that the technology will advance further and bring with it more user-specific benefits.