Two reports by the AA and Confused.com/Towers Watson have revealed that motor insurance premiums shot up by 40% in the past year. The AA’s Shoparound index of the average of three quotes for a customer recorded a 40.1% rise to £892 in the 12 months to the end of March for annual comprehensive cover while Confused said that the rate of price inflation was 35.7%.
The rapid rises have raised the question of whether consumers will return to brokers for cheaper premiums and in particular if the much-vaunted telematics solution will provide the broker channel with an opportunity to re-gain market share.
Telematics, involving in-car smart boxes that measure factors such as driving speed and style as well as distance driven and time of driving, is not an entirely new development. Aviva had an early stab at it in 2005 targeting predominantly young drivers but withdrew it in 2008 and Co-operative Insurance is currently targeting the same market using similar systems.
The number of live policies involving telematics is less than 1% of the overall market but according to Mark Townsend, MD of Capita Insurance Distribution, the rate rises provide a significant catalyst for change.
“Vehicle telematics and the more accurate assessment of individual risks that customers are representing are potentially big steps forward and a superb opportunity for the market to embrace emerging technology,” he claimed.
For Gary Humphreys, group underwriting director at Markerstudy, which is working with three telematics offerings, the technology could provide an opportunity for brokers as all the information required to underwrite properly using this technology, does not lend itself to the question sets on aggregators. “Those brokers switched on to this opportunity and targeting the right type of customer by gaining that extra information can probably gain a competitive advantage,” he said.
Mr Humphrey’s prediction is that within the next five years as much as 15% of the personal lines market may be going down the telematics route.
However, Ian Faulkner, managing director at Metaskil, a technology provider for telematics, believes the impact will be far wider. He argued that the ruling of the European Court of Justice that gender could not be used as a rating factor would be followed by age within five years leading to insurers needing to find other sources of information.
“I think in five years time 75-80% of people will be trying or will have tried telematics,” Mr Faulkner claimed. He said he also believed it could present an opportunity for brokers particularly since some customers might not be aware of how telematics operates. “Where an aggregator will only give you price, the good thing about a broker is they’ll assuage some of the concerns about how the information is going to be captured and used,” he noted.
Ian Brown, technical director of Motaquote, distributor of the i-kube product which aims to reward young drivers for not using their cars between 11pm and 5am, pointed out that it is already an option for brokers.
The Towergate-owned company already distributes through CCV brokers as well as other partners, although the majority of its business comes direct. While at present the product is restricted to 17-25 year olds, Mr Brown agreed it could be expanded over time to meet the needs of other users.
He argued: “This product does lend itself very well to the broker distribution channel as it does need some explanation of the terms and how the restricted hours will work. Brokers tend to have a more detailed discussion with customers.”
Read more: http://www.insuranceage.co.uk/insurance-age/news-analysis/2046925/rocketing-motor-premiums-telematics-agenda#ixzz1LXn0WjLU
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