While it seems that almost everyone in motor insurance agrees that telematics recording data on how a motorist drives is a good thing for the industry and customers there is a huge stumbling block over setting a standard for collecting that data.
When transport secretary Justine Greening met with insurer bosses at last week’s Whitehall summit on whiplash, she encouraged insurers to develop telematics-based products to cut premiums for and claims by young drivers.
The summit gave the government some much-needed favourable press coverage and spotlighted telematics as one solution to high premiums.
Behind all the positive headlines, though, the telematics industry is split on data standards. It is a heated debate that some fear could see the Office of Fair Trading (OFT) stepping in if it is not resolved.
Telematics ‘black boxes’ in cars produce a stream of data, such as information on speed, location, braking, cornering and time that the vehicle is being driven.
This vast amount of information is then sent to data analysing companies such as Wunelli, which condense it for underwriters to use.
The problem is that there is no agreed standard for what data the black boxes should record and how it should be recorded.
It means that if a customer wanted to switch telematics provider at renewal, the new telematics insurer could refuse to accept their driving history data because it was recorded in a way that it deems unacceptable.
And so customers who drive carefully – as many young drivers using telematics aspire to do – may not be rewarded for their good driving history with cheaper premiums.
That might leave them trapped with their provider, unable to move to get the best possible deal.
Set to explode
The UK telematics industry is young, but as more insurers adopt the technology and more policies come up for renewal, the problem is set to explode.
Sensing the urgency of the situation, the ABI has set up a telematics committee, and one of its main aims is to thrash out a common data standard. However, the ABI has its work cut out, as the telematics industry is far from agreeing such a standard.
While the ABI, Wunelli and motor intermediary iGO4 want a common data standard, one of the largest telematics intermediaries, Insurethebox, its rival intermediary MyDrive Solutions and insurance software firm Metaskil all strongly disagree.
Wunelli non-executive chairman Sandy Dunn warns that if data standards are not reached, the OFT could take action if it decides that customers are being denied the ability to properly compare telematics policies.
Wunelli and the ABI are working on a list of standards on how the telematics boxes record information, such as setting an interval – for example, once every second – at which the boxes capture data.
Software firm Polaris will then turn those standards into software that will enable insurers to transfer customers between companies.
Cutting hassle and cost
Dunn says: “At the end of the insurance term, if the customer wants to move from company A to B, they should be able to take their driving behaviour [record]. These standards would allow for that.
“My vision is that if the customer is able to take that information with them, it takes away a lot of the hassle, it takes away a lot of the admin and cost from the underwriters’ and administrators’ point of view, and hopefully will drive down the insurance cost even further.
“I’ve worked in the insurance industry for 40 years and that’s always been my vision: to transform how motor underwriting is done.
Dunn also says that if the ABI and Wunelli ensure that telematics black boxes record high-quality data, it will help in any dispute between insurer and customer where the Financial Ombudsman Service and the Information Commissioner’s Office might need to step in.
The regulators would find it far easier to deal with disputes when there is a common data standard. Dunn says: “Undoubtedly there will be situations where the insurer disputes certain situations, so the customer needs to be able to rely on the accuracy of the information and the ombudsman will be able to make a fair decision.”
Despite the calls for a common standard, however, Insurethebox is strongly opposed. Chief executive Mike Brockman says that with the speed of change in data technology, Wunelli and the ABI could have difficulty keeping track.
“Unless they’ve got a crystal ball, they can’t keep tabs on something moving so fast,” he says.
Metaskil managing director Ian Faulkner agrees with Brockman. He says telematics in the UK is still too underdeveloped for information benchmarks, and adds that forcing this through could remove the competitive advantage of the more advanced telematics players.
He said: “I think in the short term we do run the risk of coming down to the lowest common denominator.”
But there is another huge complication to agreeing a common standard, in that car makers may soon need to be brought into the debate.
The EU’s eCall directive will require all new cars from 2015 to have built-in boxes that record collisions. Car makers are using this as an opportunity to fit a full telematics box too, and offer white-labelled insurance to their customers.
BMW plans to fit telematics boxes with insurance capabilities from 2015, but other manufacturers are likely to join suit. Insurance Times also understands that Volvo and Fiat are developing their own in-built telematics insurance solutions.
To its credit, the ABI, sensing the future, is already in discussions with car manufacturers.
A spokesman says: “We are discussing a range of policy issues that telematics raises with a range of partners, including vehicle manufacturers, the data industry, and the Department for Transport.
“Part of this work is to examine standards for telematics data so that we can make the most of the technology for customers. This work is currently in its infancy, but we are looking to make rapid progress.”
The debate over common data standards in telematics is complex and divisive, but it is clear that a solution is needed, and quickly.
Biba’s head of corporate affairs Graeme Trudgill warns that speed is crucial.
He says: “The thing is that if all these different companies start doing their own thing now, that is going to create a complicated situation. If you are going to do anything, you need to do it pretty quick.”