Sponsored content: Warren Carley, principal for connected vehicles and telematics, Europe, at LexisNexis Risk Solutions, discusses why connected vehicles could bring usage-based insurance into the mainstream
The recent Insurance Times Big Debate on the untapped potential of telematics raised some valid points. Within UK motor insurance, usage-based insurance (UBI) has largely remained a niche offering. For many insurers, this limited uptake has made UBI both costly and operationally complex.
This has been one of the biggest barriers to realising the potential of UBI to reduce road risk and deliver more personalised insurance. But as the number of connected cars on UK roads expands, that barrier must be overcome.
For UBI to work effectively, insurers need access to reliable driving behaviour data that can be applied consistently across their portfolios.
Crucially, that data must be usable at scale. Raw telematics driving behaviour information from approved sources needs to be normalised and standardised in a way that insurers can interpret and incorporate into underwriting and pricing decisions.
Alongside these technical challenges sits the ongoing challenge of risk management.
Driving behaviour insights can support more accurate pricing, while also encouraging safer driving and reduce claims costs over time.
However, these potential benefits must be balanced with careful attention to data protection, regulatory compliance and consumer confidence in how personal driving information is handled.
Data advancements
In recent years the landscape has begun to shift. Advances in the way telematics data can be standardised and interpreted are making it easier for insurers to work with driving behaviour information from multiple sources.
This progress is helping to reduce some of the technical barriers that previously limited wider adoption of UBI.
At the same time, the number of connected vehicles on European roads is increasing rapidly. Modern vehicles increasingly contain built-in capabilities that can record elements of driving behaviour directly, removing the need for separate telematics hardware.
With appropriate consumer consent and the right mechanism in place, this data can provide insurers with valuable insight into how vehicles are driven in real-world conditions.
While the opportunity is significant, it is not without challenges. Data generated by connected vehicles still needs to be standardised, normalised and interpreted in ways that are meaningful for the insurance market.
It must be linked accurately to the correct vehicle and driver and be available to integrate into underwriting in a way that supports efficient and consistent decision-making.
Across the automotive sector, some vehicle manufacturers are beginning to explore how driving data can be used more effectively. Kia, for example, has begun offering customers the option to share driving data that can support personalised insurance products, alongside feedback designed to help motorists understand and improve their driving behaviour.
If insurers can work effectively with vehicle manufacturers and other industry partners to access and interpret this growing pool of driving data, the potential exists to move UBI beyond its traditional niche and benefit more consumers.
More accurate behavioural insights could help insurers provide more personalised pricing, while also giving drivers greater visibility into how their actions influence premiums.
At a time when the cost of motoring is under increasing scrutiny, models that reflect real-world driving behaviour could play an important role in improving both affordability and transparency.
The foundations for wider adoption of UBI are increasingly taking shape. As connected vehicles become more common, the insurance industry’s ability to interpret and apply driving behaviour insights at scale is likely to help define the next phase of innovation in motor insurance.
