Telematics technology was first developed in the United States for commercial fleets, and now an estimated 80 percent are equipped with these gadgets as standard. The technology provides comprehensive data services for usage-based insurance (UBI) programs; underpinning risk analysis and allowing drivers to reduce insurance rates through good driving habits.

On the back of this success, demand for UBI programs for personal line insurance has been rising steadily and last week support for this approach in the US was underlined when Towers Watson and Hughes Telematics entered into a strategic alliance to offer personal line US motor insurers with a comprehensive data services for their UBI programs.

This support for telematics is driven by US insurers looking for new ways to control claim costs, enhance pricing sophistication, improve profitability, and differentiate policyholder products and services. A self-installed device in the vehicle is used to collect valuable driving data and provide innovative connected vehicle data services. Drivers can lower their insurance rates based on their driving, and they also gain access to information that will help them improve their driving habits.

According to Towers Watson research, insurers representing 60 percent of the personal motor insurance market share in the US have implemented a version of a UBI program in at least one state. Furthermore, an additional 20 percent are running or preparing to run internal UBI pilots. Contrast that with the UK where, at the beginning of this year, about 200,000 drivers had usage-based insurance, an insignificant percentage against the 35.5 million private vehicles currently on the UK roads.

Our view:

Total Systems have long supported the Telematics approach to motor insurance, indeed we were the first company in the UK to offer an end to end solution. Not only does it potentially improve pricing options for the driver (in the first quarter of 2012, the average cost of third party fire and theft insurance certificates rose to £1,959 per annum) it also offers more transparency for the Insurer, essential as they are now under scrutiny from both the Office of Fair Trading and House of Commons Transport Select Committee who have jointly challenged those in the middle and on the fringe of the car insurance business to improve their approach.

There is no doubt that Telematics could revolutionise and improve the way we drive and how we buy insurance – but innovation is not just about the technology, it is also about changing consumer behaviour. Innovative companies are those that can quickly adapt their planned strategy to take up a new opportunity; they’re organisations that recognize and take an active role in introducing new behaviour to benefit all. But to ensure success you need the tools and the expertise to go with the vision, and Total Systems have created the software for just that approach.c