Frost & Sullivan: Telematics-based Insurance Focused on Driving Behavior Analysis Key Tool for OEMs to Attract Specific Customer Groups

More than 60 percent of insurance companies in U.S. and select regional countries in EU offer telematics-based insurance products

Jun 20, 2013, 07:52 ET from Frost & Sullivan

MOUNTAIN VIEW, Calif., June 20, 2013 /PRNewswire/ -- Telematics-based insurance originally started as a niche experimental effort by a select number of insurance companies in 2008. Since then, it has become a mainstream offer for insurance companies in the U.S. and certain European markets. Furthermore, there is a greater expectation of OEM involvement in the future that is expected to create a massive shift in the telematics-insurance value chain.

Frost & Sullivan's Automotive & Transportation ( practice finds that U.S. is one of the fastest growing markets for telematics-based insurance, in which 60 percent of the major insurance players currently offer a mileage-based or driving behavior-related discounts to customers or a combination of both.

Ford and GM have offered mileage-based insurance discounts utilizing their respective telematics infrastructure, Sync and OnStar, in the U.S. since 2010. More recently, European OEMs Citroen and Vauxhall launched "pay how you drive" (PHYD) insurance program specifically targeted at young drivers in the UK in 2012.

"The objective for all of these programs are to decrease cost of ownership for a specific set of customers, as telematics-based insurance is not a one size fits all solution," said Frost & Sullivan's Telematics & Infotainment Program Manager Praveen Chandrasekar. "This particularly will help attract first time younger car buyers, for whom cost of ownership is a big deal."

OEM involvement, though, in the telematics-based insurance space is currently at a basic level, as there is quite a bit of concern among some OEMs on certain issues, such as privacy and business models. Yet in the long-run, insurance is expected to be a key offer in a bundled service with telematic infrastructures, thus further boosting insurance-telematics popularity.

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SOURCE Frost & Sullivan