Telematics has been part of insurance for well over a decade, and it’s here to stay. Policies backed by telematics are still a small part of the personal and commercial auto insurance markets, but they’re addressing a real need. Over the next several years, as access continues to expand and new carriers enter the space, telematics adoption will grow.
Right now, adoption is modest but real. Overall, about a third of insurers have active telematics programs or pilots, and telematics represents about 6-8% of insurers’ books on average. That’s not the double-digit 2020 adoption rate that some were predicting in the mid-2010s, but it’s still a significant portion of the market.
That portion will continue to grow, as consumers will have additional options and opportunities to join telematics programs. All of the top ten personal auto insurers now offer telematics-backed policies in at least some states. Meanwhile, Novarica’s research shows that about a third of property/casualty insurers have interest in telematics, which could represent more offerings on the market in the coming years.
As for how quickly that growth will come, that’s harder to predict. Ongoing pandemic conditions are one major X-factor: Novarica has heard from vendors and insurers that interest in pay-per-mile telematics programs is up, given that many people are still working from home and commuting less frequently.
Partnerships between auto manufacturers (OEMs) and insurers are another space to watch. Ford, in particular, has recently announced a number of partnerships with insurers to share telematics data, and many drivers who use OnStar can offer their data to insurers for potential discounts. Right now, these contracts really only make sense for large insurers to pursue, but they could enlarge the market and increase penetration.
Overall, telematics is an exciting space. There’s a robust market for telematics service providers, and the capabilities they offer now go well beyond driver scoring to support discounts. Insurers are learning how to leverage the technology and are integrating features for claims, customer engagement, and fraud prevention into their offerings.
Telematics won’t dominate the auto insurance industry in the next five to ten years, but it’s here to stay, and it will increasingly affect consumer expectations whether it becomes dominant or not. Insurers should consider their strategic approach now.
This post is adapted from a longer article at Insurance Thought Leadership. To learn more about how insurers are using telematics, read Novarica’s full report, Telematics in Insurance: Overview and Key Issues.
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