Changing regulatory landscape could provide the boost needed to increase uptake of the technology
Telematics policies are expected to account for 15% of the market within five years, according to research from the Boston Consulting Group (BCG).
BCG interviewed insurers about the state of the telematics market, and the results revealed that insurers expect the UK market to increase to between seven and 10% of motor policies within three years, currently less than 1%, and to hit 15% within five years.
In its report, Telematics The Test for Insurers, BCG said that changing regulations such as the pan-European eCall directive, which will require new cars to be fitted with telematics boxes, could provide the boost needed to increase uptake of the new technology.
BCG also said that there are some common misconceptions that are currently preventing the telematics market from reaching its potential.
One area highlighted by BCG was the fact that insurers still believe that the technology required for a telematics policy is too expensive.
But in its report BCG said that emerging technologies such as telematics apps and self-installed boxes can present insurers with cheaper alternatives for a route to market.
The report also stated that insurers are making the mistake of thinking a small telematics offering is enough to become a viable telematics provider. However, BCG argues that scale is required to benefit from the competitive advantage telematics offers and therefore generate profit.