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As time passes, what was once considered innovative becomes commonplace. Not too long ago, the financial credit score as a rating variable for premium underwriting was an innovation. But now insurance industry watchers have turned to telematics. Over the past decade, a number of insurers have transitioned from discussion and experimentation to market introduction of insurance telematics. Still, as with most good tales, the hero has to prove its worth. And telematics has not been an exception to that rule.

Currently, telematics is the terminology routinely used to describe technologies associated with communication for a motor vehicle, from Google’s self-driving vehicles to aftermarket location-reporting gadgets. Since the advent of the General Motors’ OnStar program, there’s been an increasing penetration of telematics capabilities and services in automobiles. Estimates put expected penetration by 2017 at more than 70% for car manufacturers’ new vehicles. Today’s telematics in insurance usually refers to the one-way collection of available information from a vehicle, currently with no capability for feedback. Strictly defined, that’s telemetry, whereas telematics traditionally incorporates the potential for feedback, ranging from technology in autonomous cars to programs that identify driver behavior patterns. Figure 1 is a simplified diagram of the process typically available today.

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