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Telematics could revolutionize auto insurance premiums

2011

Telematics is by no means a “self-starter” in auto insurance. The cost of the technology is just as much a potential hurdle as its operational complexity. One of the biggest obstacles is likely to be data protection, however. The technology will only be able to come into its own if it fulfills data protection requirements exactly and no doubts as to their fulfillment arise. One option could be to separate the service provider and the insurance provider.

The insurer must guarantee total transparency as to which data is essential for insurance purposes and which is not. Customers ought also to be able to check which data they are providing and to have given their express consent to its use beforehand. Looking at the bigger picture, however, these issues pale in significance when they are compared with the opportunities that telematics offers and the opportunities that would be missed if the technology were ignored.

With the effects outlined above, telematics can not only take an auto insurer's business model forward but can revolutionize it, especially as genuine innovations have been rare in this area in recent years. The groundwork for telematics-based auto insurance has already been laid, and consumer interest also exists. German insurers must now take care not to miss the boat. They must think ahead, consider the effects on their own business models, and develop a strategic position of their own on this issue and its major long-term potential for market change.

Experts

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