In telematics-based insurance, a black box is installed in the vehicle to track its usage including speed, distance covered and the terrain. It is GPS-enabled, which means the vehicle can be tracked in case of theft.
The average price of a device is Rs 2,000. Based on the data collected on a monthly or quarterly basis, insurers decide the premium for a particular vehicle and better drivers would get discounts.
Bajaj Allianz General Insurance was the first company to offer a device for cars that could look into driving habits and incentivise customers. The offering, called Drive Smart, is a device that can be fitted into any car and will provide real-time feedback on driving behaviour. At the end of a year, the insurer can provide discounts on motor vehicle insurance premium based on the driving statistics.
While the price of the device has come down of late, not all insurers are ready to bear the cost.
“Customers expect the insurer to provide the device for the car free of cost,” said the head of underwriting at a mid-size general insurer. “We as an industry need to work out the cost economics so that it is not a financial burden for us,” he added.
Companies are looking at having mobile-based telematics where a separate device need not be purchased. However, its accuracy is still being tested to ascertain whether the app-based data will be as effective as a physical device installed in the vehicle.
Further, privacy issues also remain. There is no consensus on whether the insurer have to pay the car manufacturer for the data should the device come pre-installed. Also, there is no clarity on the option of exiting the service after a particular period.
Initially launched in Europe and the United States more than decade ago, Asian countries have also adopted the system in recent years.
What does telematics mean?
– Telematics involves a black box being fitted into the car
– It has a GPS system being installed in the vehicle for tracking it
– Data about number of kilometers driven, average speed and records of over-speeding are stored in the system
-Any deviation on usual driving routes are also recorded
-If an insurer gets the device installed, they get the right to store data for pricing purposes
-Some devices are also linked to mobile and can be used to track the car in cases of theft