Insurance telematics likely will go mainstream within five years, will have a medium-to-large impact on the auto-insurance market, and even though privacy concerns remain an obstacle, consumers are willing to have telematics devices installed in their cars if they can save enough on insurance, according to a recent survey.

Telematics Update surveyed 270 insurance telematics-focused executives, including respondents at insurers, telematics-service providers, consultant firms, telecommunications companies, software developers and others.

Of the 83 respondents asked by Telematics Update in August 2012 about when telematics will go mainstream for insurance, 52 percent said within three to five years and 27 percent said within three years. Twenty-one percent replied between five and ten years.

Asked about the expected impact of telematics on the U.S. insurance industry, 98 percent indicated telematics will have a medium-to-large impact on the auto segment of the marketplace. Forty-one percent expect telematics to have a large impact and “reinvent auto insurance.” An additional 57 percent said telematics will have a “medium” impact, changing pricing engines. Just 2 percent said it will have a “limited impact.”

A recent report from Telematics Update indicates that approximately 1 million vehicles in the U.S. currently use insurance telematics, and the firm asserts that the number is expected to hit 60 million by 2019. But there are some obstacles to wider adoption of the technology. Of the 83 survey respondents who weighed in on these impediments, customer privacy concerns were cited most often, mentioned by 33 percent of the executives.

Of course, even given the privacy concerns, the more consumers can save on insurance, the more willing they are to allow telematics devices in their cars. Telematics Update cites the result of a 2011 Deloitte query of 1,080 consumers regarding how much of a discount they would require to allow a telematics device in their car. Forty-seven percent responded “over 20 percent,” 22 percent responded “16-20 percent,” 17 percent said “11-15 percent, and 11 percent said “6-10” percent. Only 2 percent said they would allow installation for savings of 1-5 percent.

The Telematics Update report indicates that consumers might be lured to telematics by more than price alone. “For customers who do not respond to discounting strategies, the additional Value Added Services insurers offer may entice customers to select insurance telematics products,” the report says.

In the Telematics Update survey, 225 of the insurance telematics-focused executives weighed in on some additional services that could play a role in the success of the technology. Navigation and destination management were the two most commonly-cited features, with 72 percent and 65 percent respectively indicating that the services are “important” or “critically important” to the future success of telematics. Internet ratio was the least-cited example, with just 17 percent saying it would be important or critically important and 55 percent saying it would not be important to future success.

Special Reports /

Telematics at Tipping Point as Execs Weigh Ultimate Impact, Obstacles

Related Stories

Recommended For You