Telematics not only offers insurers some exciting new horizons, but others as well. Consider the policing of speed limits. Why bother with speed cameras when the black box will know how fast you were driving and what the permitted speed was in that area. Axa trialled just such a scheme in Ireland several years ago, although I’m not aware of its current status. Those driving within the speed limits were rewarded with lower premiums, but those who broke the speed limit frequently in any one month received a warning letter. Three such warning letters and your premium went up. However, Axa promised policyholders that this information would not be passed on to police unless legally required.
Will such promises be consigned to history or continue into the future? Clearly, more efficient policing of speed limits would allow the policy to allocate greater resources to more serious crime. Consistent policing of speed limits would result in safer roads and fewer injuries and deaths. Less speeding will result in fewer claims and smaller premiums. The phrase ‘two birds with one stone’ comes to mind.
The police and insurers already have close working relationships, particularly with regard to insurance fraud. In 2011, UK insurers started funding a 35 strong unit in the City of London Police to ensure that their work on insurance fraud continued, at a cost of £9m over 3 years. More recently, the West Midlands and Surrey police forces have been considering subcontracting elements of their criminal investigations, street patrolling and suspect detention work to the private sector. So the trend is for closer relationships between insurers and the police.
What does this mean for the relationship between insurer and policyholder? I’m thinking in particular of policyholders’ feelings of fairness in how they are being treated. Most people accept that if they’re caught speeding, then it’s a ‘fair cop’ and they take the penalty – they may not like it, but they put up with it. That is after all what the police are there to do. It’s not what most policyholders’ think insurers are there to do though.
If insurers put themselves forward as the lead provider of telematics technology, in order to maintain control over the customer relationship, and then support the costs inherent in that lead role by providing services such as the policing of speed limits, then they will struggle to turn around what is already a pretty fractured view of the fairness of insurance held by most of the insurance buying public. There is a danger that the ‘penalty’ inherent in the policing of speed limits will transfer over to, and reinforce, a widely held view that it’s difficult to get fair treatment from an insurer.
I’ll look at some interesting research I’ve come across recently on insurance and fairness in a separate post shortly – it raises interesting questions about attitudes to insurance fraud. Suffice to say that telematics may come with some unintended consequences for insurers and not just those underwriting motor.