Aviva warns insurers of telematics challenge that connected cars could present

Insurers have been warned that connected cars may present challenges for firms looking to develop telematics policies for consumers.

Matthew Washer, head of retail specialty trading at Aviva, told Insurance Times that telematics within connected cars will represent the “future of motor insurance” as the popularity of such vehicles begins to rise.

Connected cars are vehicles that are able to connect to an external network, such as to the driver’s phone via bluetooth.

They also come with inbuilt sensors that can track a motorist’s speed, location and driving habits.

According to Confused.com, they add ”more data points and analysis, such as diagnostics and characteristics like driver heart rates”.

And research published by Statista last year (20 April 2022) suggested that connected capability will make up 100% of new car sales by 2026.

“From my perspective, this connectivity is not just a technological advancement – it represents the future of motor insurance as well,” Washer said.

“This is the path the industry is taking, but it presents a challenge for insurers to develop propositions that customers will find appealing.”

Perception

Such propositions may be a challenge to develop because, according to Confused.com, connected cars may mean car drivers will not need a mobile app that tracks their driving behaviour.

And it said that, similarly, insurers may not need to install vehicles with tag-style black boxes, with manufacturers building telematics into the car itself.

However, connected car data supplier Trakm8 revealed earlier this year (10 October 2023) that the majority of drivers (57%) would choose a telematics policy if it reduced their renewal quote compared to a standard policy.

But according to GlobalData’s 2022 UK Insurance Consumer Survey, some 17.3% of drivers under 30 highlighted privacy as an issue with telematics, while 27.3% felt uncomfortable with the idea that someone was grading their driving ability.

Washer said that consumers ”have a bad perception of telematics because they don’t understand it”.

“Trust is absolutely important [and] about being transparent with consumers [will help gain their trust].”

He explained that consumers will not buy products unless they understand and trust how that product is using their information.

“[Insurers] have to build that trust [and] do that in a transparent way,” he added.

For example, Washer noted that the terms and conditions of Aviva’s Quotemehappy app were “articulated in a way customers can understand”.

In 2005 Aviva launched the telematics insurance product, which is specifically designed to provide motor coverage for younger drivers. 

“They are not reading it five terms over and thinking ‘I don’t understand what I just read.,’” Washer added.