Telematics-Based Car Insurance Systems Face Tremendous Growth Ahead

The European market for telematics based car insurance systems is poised for explosive growth from 2007 to 2015, mainly due to the continuous entry of new participants, the positive impact of the emergency call (eCall) legislation expected to be implemented in 2010 and the overall growth in the global positioning systems (GPS) market. Norwich Union’s pay-as-you-drive (PAYD) insurance model is the first commercially available product in Europe.

New analysis from Frost & Sullivan (http://www.transportation.frost.com), Strategic Analysis of the European Market for Telematics based Insurance Systems, finds that this market earned revenues of 2.5 million in 2007 and estimates this to reach 477.8 million in 2015.

If you are interested in a virtual brochure, which provides manufacturers, end users and other industry participants with an overview of the latest analysis of Strategic Analysis of the European Market for Telematics based Insurance Systems, then send an e-mail to Vanessa Quezada, Corporate Communications, at [email protected] with your full name, company name, title, telephone number and e-mail address. An overview will be sent to you via e-mail upon receipt of the above information,

“The eCall feature scheduled to be made mandatory for all new cars in Europe from September 2010 onward and the introduction of PAYD will make integrated telematics easy to market,” notes Frost & Sullivan Industry Analyst Shyamsundar Anandhan. “This is an important development since the success of the telematics-based insurance model will eventually depend on companies’ ability to integrate various telematics features into one device as well as provide a low-cost service.”

PAYD adds great value to the in-car telematics package, as it offers a good opportunity to save on annual premium for certain sections of drivers, particularly low-mileage and young drivers in the age group of 18 to 24. Norwich Union, who developed and introduced PAYD, demonstrated in its pilot tests on 5,000 drivers that more than 25 percent of these individuals saved at least 30 percent of their average annual premium.

As the PAYD product works on a GPS black-box and with eCall expected to become mandatory for all new cars from September 2010, suppliers can look to promote PAYD insurance as a standard addition in all cars. Thus, the potential of PAYD in the original equipment (OE) market could be significant.

Another advantage of telematics-based insurance systems working on GPS technology is that the vehicle’s route and speed can easily and fully be traced, making insurance frauds virtually impossible to commit. This is a great advantage in Europe, where such frauds are common, since conventional insurance systems lose track of the customer after purchase of the policy.

Insurance companies indirectly benefit by targeting low-mileage and young drivers, as reduced driving also results in lesser number of claims. Frost & Sullivan believes that insurance companies can make use of this concept effectively and make considerable profits.

However, insurance companies face a major challenge in their ability to convince potential customers to incur the initial set-up cost for PAYD. Another challenge lies in convincing high-mileage drivers about the utility value of other integrated features in the package. Data protection is also a potential threat to the PAYD model in certain European countries, where laws do not permit personal data to be available in the public domain.

“A high level of cooperation is needed among insurance companies, mobile network providers, data management solution providers and other supporting companies to carry the concept to all types of drivers in both the passenger car market and the commercial vehicle segment,” says Anandhan.

Strategic Analysis of the European Market for Telematics based Insurance Systems, part of the Automotive Growth Partnership Service, provides a detailed analysis of this market including forecasts of unit volumes and system revenues from 2006 to 2015. It also provides a case study, which presents potential savings for a typical low-mileage driver subscribed to PAYD as against conventional insurance products. Competitive analyses reveal the pace at which different insurance companies are working and give an insight into development activities in key markets. Interviews with the press are available.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company’s industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies and the investment community by providing comprehensive industry coverage that reflects a unique global perspective, and combines ongoing analysis of markets, technologies, econometrics and demographics. For more information, visit http://www.frost.com.

Strategic Analysis of the European Market for Telematics based Insurance Systems

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