Telematics may take time to hit Indian markets

Auto companies have expressed concerns regarding security of external devices being fitted into their vehicles

Telematics, which involves installation of devices in the vehicle, could take a longer time to hit the market. This is because apart from the data sharing between dealers and insurers, auto companies have expressed concerns of security of external devices being fitted into the vehicle.

Insurance company officials said while pilots had been conducted in the country by installing devices in vehicles and obtaining data on vehicle owners’ driving and behaviour, they had't been able to launch it in the retail market.

“The devices have seen a drop in prices. However, car makers are not comfortable with the devices being installed in their cars as they feel this could interfere with the vehicle's performance and security,” said a senior general insurance executive.

Prices of the devices have fallen to as low as Rs 1,800-2,000, compared with Rs 4,000-5,000 earlier.

These devices would enable insurers to get additional data on vehicle usage and offer better pricing.

Telematics is a concept that was introduced to understand the usage of the car, including the speed at which it is being driven and the distance that is covered on a daily or periodic basis. Based on the data that is collected, insurers can decide the risk profile of the customer and also tweak the motor insurance premium accordingly.

In western countries, where the premium for younger drivers is higher, they have actively purchased these devices to reduce premiums. However, in India, where insurers say premium is anyway very low at present, there would not be any substantial reduction in premium.

“Even after data is collected, not more than 4-8 per cent reduction of premium can be given based on their driving behaviour. Further, we would need regulatory nod and would need justification for the reduction,” said the head of underwriting in a mid-size private general insurer.

Telematics car insurance contains a black box, which is global positioning system (GPS)-enabled and can get data on the usage. It also helps in tracking a vehicle, if it is stolen, thanks to GPS-based location device.

There is also mobile-based telematics, where one need not even install a device in a car; a mobile application will suffice. This could be beneficial for self-driven vehicles since the mobile device will act as the GPS device.

With several electric vehicles hitting the market where such devices might not be appropriate to be installed at the manufacturing stage, auto companies are wary of them been fitted after the customer purchases it. “The companies fear GPS in the devices could affect the car's security and could even hamper speed,” said the head of motor insurance in a large private general insurer.

In telematics, motor insurance premium is calculated based on the data gathered. There could also be an online dashboard-like platform where driving behaviour is updated, which can be reviewed by owners and drivers.