Motor manufacturer data could be the ‘Holy Grail’ for improving telematics insurance

Motor manufacturers insert systems into their newer vehicles that could be utilised to monitor driving behaviour and provide insurers with the raw data needed to increase the deployment of telematic insurance policies.

This data would be “almost like the Holy Grail” for telematics-minded motor insurers, as it would remove one of the barriers to making telematics insurance more widespread – the cost of fitting a device that can capture the required driving data.

Matt Munro, chief executive of telematics broker IGO4, explained: “Motor manufacturers already get a lot of the data, they just don’t know how to use it and don’t seem to be wanting to use it.”

Munro added that collaboration with motor manufacturers to access this data and use it to craft insurance propositions could create new partnership opportunities for the insurance market.

“Motor manufacturers would need to partner up with people that understand insurance – it’s quite a complex value [and] supply chain,” he explained.

“People will want to work with the likes of us in terms of actually being able to launch these sort of joint propositions.”

Telematics insurance can provide customers with cheaper premiums for their motor insurance by monitoring and rewarding safe driving, but the cost of fitting a device that can track this data can make telematics unprofitable for insurers.

Dan Venner, head of distribution for personal lines and protection at Covéa Insurance, explained: “If you took the youngest drivers out of the market, the average motor insurance premium is around £450 – there isn’t the margin to go and stick a £50 device into the car.

“Depending on the price of the telematics device, covering the cost of that can be uncompetitive for the insurer.

“After a certain year, every car manufactured has a device in it that can give you the telemetry data we all want as insurers – no one can currently access that remotely because only the manufacturers can, but that will be the end game.”

Market changes

Motor manufacturers that decide to use the data provided by their in-built telematics devices to work with the insurance industry could significantly alter the motor insurance industry, however.

Tesla manufacturer Elon Musk revealed in May 2022 that Tesla customers will be able to purchase embedded insurance for their vehicles alongside the purchase of their car, with premiums based on monthly driving performance data gathered by telematic devices already in the vehicle.

Venner questioned whether this development – if taken to the conclusion where all manufacturers offered their own embedded cover – would create a “closed market” around vehicle manufacturers that could provide vehicles and insurance policies as a package.

He said: “It’s an interesting question because telematics [in the insurance sector is currently] trying to do something that vehicle manufacturers have half the solution for.”

However, Venner warned that vehicle manufacturers taking on too much of the market share for motor insurance in the future could reduce market choice for consumers.

He added: “At the moment, vehicle manufacturers don’t have to worry what type of driver they sell a car to, but if they only had insurance capacity for certain types of risks, then they would have to start thinking about who they sell to or what the alternative market for these people would be.”