Telematics insurance is a type of auto insurance that uses technology to track and analyse driver behaviour, such as speed, braking, distance, and other driving patterns, in order to determine the risk of insuring a particular driver. Despite its potential benefits, including increased safety, lower insurance premiums, and more personalized coverage, telematics insurance has not yet gained widespread popularity among car owners in India. Let’s take a closer look at some of the reasons for this.
No fault regime: Unlike other countries where the insured is the person driving the vehicle, in India, the vehicle itself is insured. Add to that, no fault liability claims have been factored in the Indian Motor Vehicles Act 1988 wherein accidents with no negligence are to be compensated basis a pre-decided structure. This means that there is little or no focus on individual driving behaviour, which is a key component of telematics-led insurance plans.
Multiple Drivers: In India, a car is used more as a family driven vehicle and hence same car is driven by different persons with different driving behaviour. This makes it difficult to accurately interpret and attribute differing behaviour patterns on same car for insurance considerations as part of the telematics setup. This can be problematic when it comes to accurately assessing risk and determining insurance premiums.
Privacy concerns: Telematics insurance involves the collection and analysis of personal data, which raises privacy concerns for some car owners. While data privacy laws are in place to protect individuals, there is still a perception that telematics technology is invasive and not transparent. This can lead to reluctance among car owners to share their driving data with insurers. To some, the very fact that all their driving habits and routes /destinations undertaken are being viewed by their insurer is not very appealing.
No clear tangible benefit to policyholder: While telematics insurance has the potential to reduce insurance premiums for safe drivers, not all insurers have the same way of interpreting and using telematics data. This means that since different insurance companies interpret and use telematics data in a non-standardized manner, there is no clear benefit that a policyholder can enjoy, regardless of their choice of insurance company. In India, no claim bonus (NCB) is arrived at based on claim behaviour, and in order to make telematics insurance a success, a tangible benefit like NCB will have to be established at an industry level. Only when the benefits of telematics insurance can be enjoyed across all or majority of insurers, can a tangible benefit be enjoyed.
Cost prohibitive: In India, the majority of car owners are more price conscious than value conscious when it comes to insurance buying. Telematics insurance requires hardware such as sensors and cameras to track and analyse driver behaviour, which can add to the overall cost of the insurance premium. This can make telematics insurance cost prohibitive for some car owners, particularly those who are already struggling to pay for their insurance.
Data interpretation accuracy: Driving and road conditions vary widely in India. An event like hard braking on a highway can be easily attributed to driver behaviour, but could also be due to an animal darting across the road suddenly. Such distinction of events and accuracy of tagging cannot be achieved by using telematics alone. Add to that, the complexity in driving patterns due to multiple drivers could further lead to inaccurate assertions while analysing and deducing from telematics data alone.
For telematics insurance to gain popularity, several changes need to be made. Insurance products will need to be altered to incorporate telematics technology along with sensors and cameras. The technology will need to be cost-friendly, and a clear benefit will need to be established for the policyholder. Data privacy concerns will need to be addressed, and the accuracy of data interpretation will need to be improved.
In conclusion, while telematics insurance has the potential to revolutionize the auto insurance industry, it still has a long way to go before it gains widespread popularity among car owners in India. As technology continues to advance, however, it is likely that telematics insurance will become increasingly important in ensuring the safety and well-being of drivers on the road.