Using telematics will enhance experience for insurers

0

KUCHING: Embracing telematics – a branch of the IT sector which deals with the long distance transmission of computerised information – should provide many upsides for both insurance operators and its consumers within Malaysia.

According to the research arm of MIDF Amanah Investment Bank (MIDF Research), against a backdrop of the detariffication of the motor segment, insurance providers here have observed to be more technology-centric as they adapt to the changing landscape of the  sector overall.

To note, several operators have begun to implement telematics or the collection of data through telecommunication (telco) technology into their motor packages by teaming up with local telco and technology players.

These include the partnership between Digi Telecommunications Bhd and Tune Protect Group Bhd (Tune Protect) for the implementation of telematics devices in vehicles; and the memorandum of understandings (MoUs) between Axiata Group Bhd’s funded Katsana Advanced Telematics Malaysia (Katsana) with Allianz Malaysia Bhd, Etiqa Insurance Bhd and Etiqa Takaful Bhd.

The collection of data from drivers is expected to benefit both insurance/takaful operators and consumers as it is anticipated to encourage safer driving habits while reducing insurance claims loss ratios and risks for operators.

“In regards to the claims loss ratio, we expect it will be down trending due to the ability to track and locate lost cars using the telematics technology which has a 96 per cent recovery rate according to data from Katsana.

“However, for now, this technology is largely used to provide discounts as a reward to motorists with good driving behaviour,” said the research arm.

Besides just promotion of safer driving habits, consumers can also expect to see more innovative insurance/takaful products such usage-based products or also known as ‘pay as you drive’ products that incorporate the usage of telematics to its full potential by providing a comprehensive mechanism to price premiums.

Thus, allowing operators to reward their safe and dutiful driving consumers with lower premiums that more accurate calculate their risk.

Despite the obvious benefits of telematics technology integration into the general insurance/takaful sector, there was still concern over whether or not the majority of consumers would be willing to share their driving data with operators.

MIDF Research reckoned that this would not be a huge barrier to telematics technology integration as they believe that Malaysia would likely follow the trends of data sharing acceptance as seen in Europe.

Drawing reference from a case study and survey of telematics usage across Europe by Deloitte, the research arm noted that the usage of telematics has spread widely across Europe since 2014 with Belgium leading the way with 40 per cent of its respondents indicating that they would very likely share data with their insurers.

“We view that the high willingness will serve as a defining factor to fuel further advancement of the motor insurance market,” the research arm said.

And should a similar study and survey be conducted in Malaysia, MIDF Research was confident that the rate of acceptance will likely mirror that from Eurozone due to the fact that our digital consumption is nearing maturity with a 65 per cent internet penetration rate.

“In addition, we are confident that data-sharing will be a less critical issue in Malaysia; with various securities protection and policies are being enforced to preserve privacy.

“Statistically, insurance companies stood as the third most trusted entity to share data with, after employers and banks. Also, few services have been identified as pulling factors for consumers to share their data more willingly,” they added.

Looking forward, MIDF Research opines that technology will continue to play a pivotal role in shaping the insurance industry as its impact to insurers and takaful operators are substantial, making it an indispensable asset for the businesses to stay competitive.

“Digitalisation initiatives are seen to be a prominent approach to shaping the overall insurance/takaful landscape.

“Notably, the overall development in motor insurance is believed to improve the current and future product offerings, fuelling the enhancement in customer loyalty.”