Telematics and cost of living

The cost of living crisis is real.  For most Britons, their biggest household bill after council tax and energy is their car insurance.

We have seen that inflation is slowing a touch as oil prices reduce.  However, ONS data has also revealed that the price of car insurance shot up 50.9% in the last 12 months.

Ouch!

A typical policy now costs £2,145 for under-25s, £850 for the 25-to-49 age group, and £568 for over-50s

Our recent YouGov survey found that insurers are missing opportunities to win new telematics motor insurance customers. Only 4% of respondents had received any communication from insurers about telematics benefits.

This low number is partly owing to the lack of transparency offered by price comparison websites.  Additionally, it is at odds with consumer demand as the interest in telematics-based insurance continues to rise.

How does telematics work?

Telematics involves having a small device fitted to your car that records the speed, distance travelled and time of the day the car is driven. The device can also monitor motorists’ driving style by recording braking pressure and speed of acceleration.

This information is relayed to the insurance company and in some cases, you are rewarded with a discount or other rewards for good driving. However, there is a potential downside. The customer’s premium could go up or their insurance may be cancelled altogether if they drive carelessly or badly.

How does telematics appeal to consumers?

Three main incentives for choosing telematics-based insurance policies were expressed by respondents. These are:

• Obtaining cheaper car insurance
• Being incentivized financially to drive safely
• Having improved awareness of their driving style

Other ways telematics can help you save…

The appeal of telematics policies is broadening as a way for all drivers to access lower premiums. Redtail Telematics’ customer By Miles offers pay-as-you-drive policies. These policies are priced by the mile and only use the distance driven. There is no driver scoring or curfews. This brings telematics out of the youth market and offers the benefits of smarter, fairer pricing to a far wider audience.

Half of road users have reduced their mileage through the cost of living crisis. As a result, they may now be better off with pay-by-mile insurance. On average, those drivers who switched to By Miles were able to save around £300 a year. These savings will help with expenses elsewhere and the cost of living crisis.

Impacts of new legislation in January 2022

New rules introduced in January 2022, prevent insurers from quoting higher prices to existing customers than they would a new customer. This practice of ‘price walking’ was outlawed in an attempt to make insurance pricing fairer and more transparent. With telematics, insurers can help their customers reduce their premiums AND deliver a wealth of benefits. These benefits include improved driver safety and a more efficient claims experience.

Action needed!

This round of research has been particularly revealing about how the insurers’ message is not getting through. As a result, the public’s understanding of the benefits Telematics policies can bring is poor. The richness and relevance of telematics data remains invaluable.

It informs insurers looking to:

• Provide fair pricing
• Improve road safety
• Respond to environmental concerns

Redtail is passionate about our data informing insurer data to make a discernible impact on all three.