Insurance telematics will be “an alternative product for motor insurance

Interview by:Emily Watson with Tony Lovick, Senior Consultant, Towers Watson

Insurance telematics will be “an alternative product for motor insurance”

TU talks to Tony Lovick, senior consultant with Towers Watson, about the growth of insurance telematics and the impact of the European Court of Justice’s gender ruling
What does your company do?

Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk, and financial management.

What is your role in the insurance telematics market?

I led the pricing analytics and database architecture design for the Norwich Union (now Aviva) pilot from 2003 to 2007. During this time, we accumulated a database of billions of rows and used this to produce telematics-specific insurance factors for rating. We also purchased the Progressive Corp. patent for the UK and began a partnership with them to share insights. Within Towers Watson we have continued this work, and are currently working with a number of insurers on an insurance pilot. We help to evaluate devices, host the telematics data, and perform the pricing analysis.

How important is telematics throughout the insurance market?

In the US, insurers can see Progressive making a success of the technology, with their announcement that they intend to conduct a national rollout of the product. Vehicles and GPS data are clearly global constants, however, and this success will be translated to other territories in due course. Many other companies around the world are doing evaluations of the technology to prepare for this advance.

What is needed for the large-scale success of PAYD/usage-based insurance?

Retail insurance is a thin margin business that needs to bridge a tight cost/benefit case to be viable in the mass market. Unlike commercial vehicles, where there are sufficient non-insurance benefits, the retail market has seen consumers using their own (satnav) gadgets to provide non-insurance benefits, leaving the insurance device to pay its own way. Rapidly moving technology is changing this landscape, however, and the availability of 2mm sim chips, Bluetooth, public wifi, smartphone apps, and even the mass production of GPS chips for applications such as photo tagging in digital cameras will all move to convergence in these markets. In a few years time, we will wonder why forging these links was ever a challenge.

How do you view the role of auto OEMs in insurance telematics?

Vehicle manufacturers have a much longer development cycle than telecom handset manufacturers; the difference is months compared to years. They have also had a torrid time financially, both leading up to the financial crisis and during it. I suspect that line fit capability will most likely be fulfilled by third party outsourcing from the vehicle manufacturer to device manufacturers who can meet the timescales and price.

Where do you see the insurance telematics industry heading in the next five years?

I think it will become known as an alternative product for motor insurance by consumers, much as the telecom market has moved from monthly subscription to PAYG rates and consumers can choose between them. I do believe that the European Court of Justice’s ruling to prevent general insurers from using gender as a basis for pricing from December 2012 opens a wider window of opportunity. Those groups of society that are inevitably going to see an increase in their insurance costs won’t want to feel they are subsidizing others, and telematics provides an opportunity to avoid that.

For all the latest on insurance telematics, join the industry’s key players at Insurance Telematics Europe 2011 on May 4 and 5 in London.


Emily Savage | Conference Producer
Telematics Update | 7-9 Fashion Street, London, E1 6PX, UK
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