Insurance industry leaders voice concern over issue of mandatory telematics

Out-Law News | 20 Jun 2014 | 12:16 pm | 3 min. read

Mandatory telematics in cars for insurance purposes would force drivers to "fight or beat the system", according to insurance leaders, insurance industry publication Post has reported.

Making in-car telematics mandatory should not become the default position said one expert, while one said that compulsory adoption would lead to drivers evading the system.

The industry leaders made their comments following an event organised by Post which discussed the probability of consumers having to opt out of telematics in 10 years’ time.

Insurance companies are increasingly recording information via devices in cars that allows them to set insurance premiums that reflect the driving style of motorists. The recorded data is often referred to as telematics data.

Richard King, chief executive of Ingenie, which offers in-car technology and discounts for young drivers who "drive well", told Post that he did not agree with making such technology mandatory.

He said that the question of mandatory telematics for young drivers was raised in discussions with the UK government due to what Post described as the technology’s "proven results in achieving safer driving for that group". King said that his own answer to the issue was "a huge no".

“What has sometimes come up is the question, ‘should we make it mandatory if the results are that significant and we are heading towards solving what has become a social and economic issue for young drivers?’”, he told Post. “The minute you make anything mandatory, people will spend most of their time and effort trying to find a way to fight or beat the system. We should make the benefits so obvious and apparent, without any curfews or restrictions, that people see the benefit and then opt in.”

DLG motor insurance commercial director Gus Park said that consumers should be left to decide whether they want the technology.

“I don’t think it would be a good thing for (telematics) to become mandatory or even for the default position (to be) that customers have telematics,” said Park, according to Post. “Telematics is a very pro consumer thing and a lot of the benefit is that we give customers the opportunity to decide whether they take it.”

The issue has been the subject of widespread media debate in the UK recently amid suggestions that telematics could be administered on an opt out basis in future. 

Tom Lewis, head of innovation and insight at the online comparison website Go Compare, told the Post the longest timescale in which opt out telematics would be introduced would be 10 years.

“As the cost of devices comes down and we move away from pre-installed devices, the penetration of telematics will continue to grow," Lewis told Post. "As soon as it gets to a 50% penetration, the rest of the market will come along fairly quickly. We will see a move away from pay-as- you- drive policies to an expansion to standard type policies that are underpinned by telematics. You will still pay an annual fee but there will be a telematics device included or an app usage requirement, and that data would be used at the point of claim or to set renewal prices or mid term adjustments.”

However Stephen Humphrey, head of business performance at insurethebox motor insurers said a 10 year timescale for opt out telematics seemed unlikely in light of uptake to date.

“We are by far the biggest telematics provider (in personal lines)," Humphrey told Post. "We have got more than 120,000 customers, but there are 20 million vehicles out there. You are talking about a massive acceleration in order to get to the stage where (telematics would be opt out).”

Ian Bowen, sales director at Innovation Group which offers business process services and software solutions to the insurance, fleet, automotive and property industries, said that although he believes mandatory telematics is unlikely, he expects it will become increasingly difficult to purchase an insurance policy without it.

“Effectively, one way or another, it will be priced into the market,” Bowen told Post. “I don’t think people under 30, and maybe even under 50, would be too worried about it, especially if it means they would get cheaper insurance.”

Esure car insurance chief underwriting officer Jon Wilshire said development in other areas could provide competition for telematics.

“There are other innovations that could provide competition, such as driverless cars, advancements to mobile phones and car manufacturers embedding tracking technology in (vehicles). There are many things that need to be considered to determine whether a technology becomes very successful in the future.”