Sunday, 20 August 2017

Telematics could solve consumer confusion, increase loyalty for car insurance industry

Telefonica
Friday 17 May 13

Report based on poll of more than 2,000 UK adult drivers by YouGov, commissioned by O2, shows: •Widespread mistrust and confusion around current driving premiums •Telematics presents opportunity for car insurance companies to increase customer loyalty •Further education around the benefits of insurance telematics is needed Insurance Telematics, a system through which premiums can be calculated based on an individual’s driving habits and behaviours, represents a significant opportunity to insurance companies to differentiate themselves and build loyalty amongst their customer base. That is the finding of a new survey by YouGov and O2, the commercial brand of Telefónica UK, which explored current consumer attitudes to car insurance providers and insurance telematics…

Report based on poll of more than 2,000 UK adult drivers by YouGov, commissioned by O2, shows:

•Widespread mistrust and confusion around current driving premiums
•Telematics presents opportunity for car insurance companies to increase customer loyalty
•Further education around the benefits of insurance telematics is needed

Insurance Telematics, a system through which premiums can be calculated based on an individual’s driving habits and behaviours, represents a significant opportunity to insurance companies to differentiate themselves and build loyalty amongst their customer base. That is the finding of a new survey by YouGov and O2, the commercial brand of Telefónica UK, which explored current consumer attitudes to car insurance providers and insurance telematics.

According to a poll of more than 2,000 UK drivers, the majority (59 per cent) of respondents don’t fully understand how their insurance premiums are calculated, and an alarming 42 per cent stated they don’t feel it offers value for money. The results also indicate that drivers today see car insurance as a commodity, with 56 per cent of respondents stating they viewed all car insurance companies in the same way, with the only differentiator being price. This presents a significant challenge to insurance companies in maintaining loyalty, leading to expensive customer acquisition costs and lower margins.

The results however show a clear solution for insurance companies in the form of insurance telematics, with drivers indicating that value-added services and increased transparency would represent clear differentiators for the industry in the future. In fact, 52 per cent of respondents stated that services such as exclusive offers, access to top tips and monitoring their child’s driving habits, would increase the likeliness of them renewing their current policy. Even the core telematics services, of incorporating driving habits and usage into the pricing model, would result in 60 per cent of respondents being more loyal to their current insurance provider.

Insurance telematics is a global priority for Telefónica, the global parent company of O2. The company is positioned to become the partner of choice for insurance companies to offer telematics services to their customers and build stronger and more meaningful relationships. In February 2013, the company launched its first pay as you drive car insurance policy in Spain in partnership with the Generali Group, followed by a similar telematics proposition in Germany. Telefónica predicts that the UK insurance sector will be next to see widespread adoption.

The results of the study demonstrated clear challenges and opportunities for the industry in rolling out these solutions and bridging the divide.

First mover advantage still available to insurance providers
Despite the majority of UK drivers being in favour of having an insurance premium based on usage, nearly three quarters (74 per cent) were unaware of insurance telematics and the potential benefits it can bring. This demonstrates that UK insurance companies moving first in this space have a clear opportunity to benefit, prior to telematics becoming the de-facto standard.

Young Drivers
The research highlighted that demand for insurance telematics was highest among young drivers, with confusion and mistrust of car insurance premiums rife amongst 18-24 year olds. 67 per cent of this group do not understand how their car insurance is calculated and a vast majority (72 per cent) feel that they are overcharged due to their age. As a result a majority of young drivers (55 per cent) would be willing to have their driving habits monitored to inform their premiums, and over a quarter (26 per cent) will be actively looking for a pay-as-you-drive policy when they next renew. But it’s not just young drivers who would be interested in telematics, with 16 per cent of parents admitting they would renew their policy if it meant they could monitor their child’s driving habits.

Insurance telematics is not just about saving money
The drivers polled demonstrated an appetite for telematics due to the improved safety level it can bring. 37 per cent of all drivers surveyed said that the ability to have a breakdown or emergency service automatically alerted in the event of a breakdown or accident would make them more likely to install a telematics device in their car. The technology can also be used to provide an early warning system for technical issues in cars, and over a third of drivers (34 per cent) said they would consider a telematics device if it offered this breakdown early warning system.

Telematics was also highlighted to have broader benefits to society, with 53 per cent of drivers believing that having driving habits monitored would encourage safer driving and reduce the amount of accidents on the roads. Over a quarter (28 per cent) of drivers would also be encouraged to take public transport more often if their car usage impacted their insurance policy.

Quote
“There is a clear appetite for insurance telematics within the UK, especially for early adopters, both in terms of increasing loyalty through building stronger relationships with their customers,” said David Taylor, MD of M2M, Telefónica Digital UK.. “Customers are currently disenfranchised with their insurance providers through lack of understanding of pricing and lack of differentiation within the marketplace. Usage-based premiums offer a way to bridge this gap, providing clarity and the opportunity for a closer relationship between insurer and consumer. This brings us closer to achieving the best situation possible for both drivers and insurers.”

About the report
The report combines data from a quantitative survey of more than 2,000 UK adults carried out by YouGov in April 2013*.

* All figures, unless otherwise stated, are from YouGov Plc. Usable sample size was 1078 adults. Fieldwork was undertaken between 30th April-1st May 2013. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).


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