Telematics could become compulsory in new cars

The UK could follow Italy’s lead and make telematics boxes compulsory in all new cars.

That’s the view of Ofir Eyal, principal management consultant in the London office of the Boston Consulting Group (BCG).

Eyal, who has worked in insurance for more than 10 years and specialises in risk management and motor insurance strategy, told delegates at the Insurance Telematics Europe conference in London that the UK Government was looking at the merits of ‘Monti’s Law’.   

Italy introduced legislation last year sponsored by the former Italian Prime Minister Mario Monti, making telematics boxes compulsory in new cars in response to the rising number of fraudulent whiplash claims.

Eyal said: “The transport minister is looking at this as a potential blueprint for how regulation might look in the UK.”

However, roads safety minister Stephen Hammond played down any suggestion of imminent mandatory legislation.

“The department continues to work with the insurance industry on the roll out of telematics products, which offer the potential to reward safe driver behaviour and penalise financially those who do not drive safely,” he told Fleet News.

“It is up to insurers and drivers whether they use these products but we have no plans to make them compulsory.”

Italy has the most mature telematics in Europe, achieving a penetration rate of 3%, compared to a rate of 0.3% in the UK. However, experts are predicting significant growth in the UK insurance telematics market over the next few years, irrespective of any potential legislation.

A BCG study suggests that by 2020 more than 15% of all policies in key European countries will be using telematics.

Major insurers already have a presence in the UK insurance telematics market, though these are predominately aimed at young drivers.

But there are also several products available to fleets, such as Zurich Fleet Intelligence, which was launched in 2010.

It combines vehicle telematics with reporting and driver development tools to help fleet operators improve safety, cut operating costs and reduce environmental impact through lessened fuel consumption and vehicle wear and tear.

Frederic Bruneteau, managing director of Ptolemus Consulting Group, said: “Most insurers use static or statistical criteria such as age or location to evaluate a driver’s risk. Insurance telematics takes into account this criteria, but gives four new parameters – distance, time, place and driving behaviour. It is the fastest growing segment of the insurance industry.”

Insurers are developing products ranging from simple trackers to behaviour-based policies. Manufacturers are also beginning to embrace insurance telematics, with Citroën fitting its C1 Connexion special edition with a telematics ‘black box’ as standard to reduce the cost to younger buyers of insuring a new car.

The Smartnav system, provided by Trafficmaster, allows Citroën to offer free insurance for the first year of ownership to all eligible drivers from 19-75 years of age when the car is funded with Elect 3 or Elect 4 finance.

Meanwhile, Vauxhall teamed up with young driver insurance specialist Ingenie last year to provide 17 to 25-year-old drivers with more affordable insurance.

The benefits available to manufacturers are significant, with the potential to increase aftersales revenues and improve customer retention through greater connectivity.