MyDrive Solutions chief executive, Linden Holliday, recently remarked that there are serious limitations to the nascent technology, despite how many car insurance companies have begun to offer it to customers looking for cheaper car insurance. Telematics, which involves the collection and analysis of motorist behaviour in order to assess and calculate their individual level of risk, allows insurers to be more accurate and provide premium prices that are more reflective of the likelihood a given driver will be involved in an accident.
The new technology has become far more prevalent recently due to the price of creating devices that use telematics becoming more affordable, making the option much more practical than it would have been just a few short years ago. Moreover, new changes to motoring legislation have had an affect on the insurance industry, and insurers are looking for new ways to control costs.
One such change soon to be instituted as a result of this legislation is a ban on determining premium prices on the basis of gender. While male drivers have paid much higher car insurance rates than their female counterparts, a ruling from the European Court of Justice has put an end to the practice, which means that insurance providers need to reassess how they determine risk.
This has led many insurers to turn to telematics as a way to make these risk determinations. However, some experts feel that the approach is a fundamentally flawed one due to technological limitations.
Data transfer rates with telematics devices are simply not sufficient to collect enough information to make proper determinations, detractors say. In fact, some insurers have sought to minimise the data that needs to be collected before they can make driver risk assessments, with the results being that sampling rates are too low to paint a proper picture of a driver’s motoring habits.