In Focus: Does telematics remain untapped, or is the tech overhyped?

WE ASKED: ”Does the power of telematics in the motor insurance market remain untapped, or is the technology’s potential overhyped?”

Dan Ward, telematics director at Acorn Group 

Telematics still has significant untapped potential in motor insurance, but its real value will come from how the industry uses it to improve the driving experience, not just the pricing model.

In the future, telematics will move beyond a niche product for young drivers and become a more mainstream part of how motor insurance works. As vehicles become more connected and drivers become more comfortable sharing data, telematics will help insurers better understand how, when and where vehicles are used, allowing cover and pricing to more closely reflect real world behaviour.

Drivers with a black box will benefit from more than just potential premium savings. Telematics can help drivers build safer habits, receive feedback on their driving and access services that support them on the road, from safety alerts to more personalised cover that evolves as their driving patterns change.

For insurers, telematics creates the opportunity to move from a largely reactive model to a more proactive one. Data from connected vehicles can help identify risk earlier, support safer driving and open the door to new services that sit alongside traditional insurance, creating a more connected ecosystem around the driver and their vehicle.

So while telematics has been talked about for many years, its broader role in shaping safer roads, fairer pricing and more responsive insurance products is only just beginning to be realised.

Ann Constantine, chief operating officer at Consumer Intelligence

Telematics is often described as the future of motor insurance, but in the under-25 market it is already well established and, at Consumer Intelligence, we have been tracking its evolution closely.  

Our data shows almost half of young drivers have been offered a quote for a telematics policy, 27% currently have one installed and 34% have used telematics insurance before.

Telematics brands also return the lowest prices for under-25s around 75% of the time across the four main price comparison sites.

Our view is that the challenge is not the technology – it is how the industry has sold it.

For many young drivers, telematics is not a genuine choice. Traditional insurance is priced so high that a black box policy becomes the only realistic option.

When customers feel pushed rather than persuaded, trust does not follow, which helps explain why adoption often drops once drivers build a no-claims discount and regain the freedom to choose. Adoption and acceptance, it turns out, are not the same thing.

The real opportunity is to move beyond compliance-driven uptake and towards true usage-based insurance – products that genuinely reflect how people drive and offer a clearer, fairer value exchange.

Telematics is not the destination. In our view, it is the bridge. Right now, the industry is stopping halfway across.

Manjit Rana, executive vice president for insurance at Clearspeed

Telematics has been a feature of the UK motor insurance landscape for over 25 years, yet it’s position today is best characterised as proven but underutilised, with penetration still hovering around 10-15% of the personal lines motor.

The fundamental value proposition is not in question. Telematics enables behaviour-based pricing, enhances risk selection and supports safer driving outcomes, whilst also improving claims accuracy and fraud detection.

However, adoption remains structurally constrained. Usage is heavily concentrated in the young driver segment, where premium discounts and parental influence drive uptake, but retention is weak, with many customers exiting once affordability improves.

The core barrier is not technological capability, but consumer value perception and trust. Most drivers are reluctant to accept continuous monitoring by their insurer, particularly where data usage may lead to perceived penalties rather than benefits.

Given that the majority of policyholders will not claim in any given year, the trade-off between surveillance and financial reward remains unconvincing for mass-market adoption.

For insurers, operational complexity further limits scale, including data integration, quality and programme economics.

Looking ahead, the next phase of innovation may lie beyond traditional telematics leveraging alternative data and point-in-time, highly accurate risk assessment models to deliver behavioural underwriting without the friction of continuous tracking.