Insurance telematics to shed niche status - Celent

Telematics-based insurance will burst onto the insurance mainstream as technology costs recede, privacy concerns wane and regulations become more supportive, predicts research and advisory firm Celent.

In a new report titled Telematics-Based Insurance: Has Its Time Finally Arrived? Celent says Telematics remains a niche market for the time being, but that there is no reason to believe it will remain so.

The firm pointed out that more than 50% of the top UK and US insurers have a telematics insurance programme in place. One insurer Celent interviewed for the report said: “This will change our core business.”

“There are weekly announcements of new telematics-based offerings. Some big names are placing their reputations on the line,” said report author and Celent insurance group senior vice-president Catherine Stagg-Macey in a statement. “In our view, the barriers are no longer around the technology but rather the customer’s appetite. The question remains: can insurers make this an interesting proposition for the customer?”

Celent also warned that there was a threat to late adopters of telematics. The company argued that better drivers will enroll in telematics programmes, leaving behind a shrinking pool of poorer risks. “Insurers doing nothing about telematics today are effectively betting that some of the largest names in the insurance business will fail,” the report said.

The report asserted that there would be winners and losers in telematics. “The long-term winners will certainly include the largest insurers that use their scale and better technology resources to more effectively price, gaining market share from smaller players,” the report said. “The winners may also include the more agile and flexible non-traditional insurers.”