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Telematics boxes to could be compulsory in new cars

  Monday, 27 May 2013

The UK could make telematics boxes compulsory in all new cars, which could transform the way car insurance is assessed and priced.

Britain could follow in the footsteps of Italy, who introduced similar legislation last year, following a rising number of fraudulent insurance claims.

Telematics boxes provide reporting data which can improve car safety, reduce operating costs and improve overall fuel consumption. Insurers can use this information to more accurately assess the risk of a driver’s behaviour behind the wheel, rather than merely relying on age and car specification risk factors; this then allows policy prices to be amended accordingly:

“Most insurers use static or statistical criteria such as age or location to evaluate a driver’s risk. Insurance telematics takes into account these criteria, but gives four new parameters – distance, time, place and driving behaviour. It is the fastest growing segment of the insurance industry,” said Frederic Bruneteau, managing director of Ptolemus Consulting Group.

Ofir Eyal, who specialises in risk management and motor insurance strategy at Boston Consulting Group (BCG), feels that such devices could drive government legislation:

Eyal said: “The transport minister is looking at this as a potential blueprint for how regulation might look in the UK.”

The government, however, played down the likelihood of legislation coming into effect soon:

“The department continues to work with the insurance industry on the roll out of telematics products, which offer the potential to reward safe driver behaviour and penalise financially those who do not drive safely,” said Stephen Hammond, roads safety minister.

“It is up to insurers and drivers whether they use these products but we have no plans to make them compulsory,” he added.

Big insurance companies already use telematics for young drivers, allowing them the opportunity to reduce their yearly premiums. Although penetration of telematics technology in the UK is low at 0.3%, BCG suggests that 15% of all key European country’s policies will use telematics by 2020.

Zurich Fleet Intelligence is a particularly popular product on the market, and is widely used by car fleets to monitor vehicle performance. Citroen includes a Smartnav system, provided by Trafficmaster, allowing the car manufacturer to offer free insurance for drivers aged 19-75 for the first year of ownership.

With car technology improving dramatically, it could be time to trade in your old vehicle for a new model. 

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