Developments in telematics are set to transform the 2016 global claims market, says Pravar Gautam
UK car accident claims recently surged to £12bn a year and remain on the up, with average claims going up by over £100 last year, according to the AA.
Premiums have also gone up. This price rise can be partly explained by an insurance tax hike levied by the Government. The Insurance Premium Tax (IPT) was raised from 6% to 9.5% in 2015, meaning insurance buyers now pay a higher tax on each policy. But an increase in claims has also been a contributing factor.
Across the rest of Europe, motor insurance accounts for 30% to 35% of overall non-life premiums and the claims market is significant.
Despite the premise of a single EU market, motor insurance premiums differ considerably between EU member states, and can be inconsistent. Premiums reflect expected claims costs and frequency, which means there are a number of factors that can explain, or at least influence these variations.
The 2013 report published by Insurance Europe on European motor insurance markets confirmed that the cost of motor insurance claims varies widely across Europe, and revealed that the average cost of motor third-party liability (MTPL) claims ranged from €1,200 in Portugal to more than €5,000 in Italy and Sweden.
The big whiplash issue
The US and parts of Europe appear to have developed a claims culture, evidenced by the ever increasing number of whiplash claims.
Accounting for almost 17% of UK claims in 2015, whiplash remains a major issue in the UK, with fraudulent claims still a big problem. The issue isn’t just a UK one, however. Italy, for example, has about 2.5 million drivers now using telematics. Insurers have embraced the technology to tackle fraudulent claims, which have become a serious matter for the country.
With £336 million of UK claims thought to be fraudulent last year, insurers at home are also turning to technology to try and help stamp this out.
In addition, the Government expects to remove £1bn from the cost of UK motor insurance over the next year with its proposals to end the right to cash compensation for injuries such as whiplash and increase the upper limit for claims in the small claims court to £5,000.
How is technology revolutionising the claims market?
The last 12 months has been a period of significant change for the claims market as new technologies shape how accidents are recorded, analysed and responded to. These advances are expected to gather pace over the next year.
A number of different telematics technologies, including the traditional black box or on board systems, have been developed to monitor driver behaviour more accurately in the last year, focusing on proxies that can be used to create very accurate risk profiling.
These factors, which include speeding, harsh braking as well as road type, mileage, peak and off-peak driving, enable insurers and claims adjudicators to better judge the likelihood, severity and type of accident.
The use of telematics has increased significantly in the last two years as more and more insurance companies look to implement policies and initiatives which monitor driver behaviour. The number of telematics policies is expected to exceed 28 million in the UK by 2019.
Companies are developing other such technologies such as those that measure tiredness at the wheel. These products benefit both the driver, who will be alerted, and for the insurer, who will be told that, although the motorist’s driving seems to be fine, with no harsh braking or other problems, they are susceptible to driver fatigue.
Improving collision analysis
The use of telematics can already provide useful assessment tools to the claims departments of insurers of all sizes, as when an accident occurs, the vehicle would be taken to a garage, the garage would take some photographs and the photographs – along with an estimate for the cost of repair – would be sent to the insurance company.
With this process in place, insurers do not possess all-important context, data and measurements that telematics can provide, which has been referred to as similar to the black boxes synonymous with aircraft. Telematics technology has been developed to the extent that the precise impact zone, magnitude and angle of impact can be recreated in a 3D replay. This technology is already transforming the claims process for adjudicators, insurers and claimants alike.
What to expect in 2016?
There are a number of exciting projects being developed across the telematics space. With the proliferation of big data and the development of new technologies internationally, a range of companies are taking advantage of the connected car phenomenon. For the claims market notable changes include virtual reality accidents, faster data transfer and accident information, and robot drones.
The development of virtual reality glasses, particularly in the gaming sector, has piqued the interest of various companies who are considering how they can take advantage of this technological leap to pioneer new products. Car insurers and tech companies are included in this group, and they are looking at using the technology to develop glasses whereby accidents can be recreated.
As well as changes to the durability and scope of the technology, telematics providers are already also ensuring devices are transferring data at the fastest speed possible.
In order to do so, telematics devices are becoming compatible with 4G networks for fleets, which means users will benefit from greater bandwidth and faster data transfer rates. This negates the need for customers to utilise GPS tracking alone, as an upgrade to a faster network will provide new benefits such as real-time driver safety coaching, improved transparency over vehicle maintenance, video functions, and other productivity tools.
In the US last year almost 300,000 civilian drones were registered in one month. The number in the UK is also predicted to rise, despite stricter government rules on flying them here. Technology companies and insurance providers are also looking at the potential use of drones to analyse accident sites in real time, capturing video and providing even more evidence for adjudicators to analyse potential claims.
While there is red tape and a number of complexities to deal with, it’s a technological development that could take off.
Pravar Gautam is head of Emea and Asia at Scope Technologies