The use of telematics in car insurance isn’t new. For the past few years, more and more drivers have been signing up to have little black boxes installed in their cars that monitor their driving behaviour, as insurance companies offer incentives such as lower premiums and discounted rates for safe drivers. 

What is 'telematics'?

“Telematics are devices that monitor real life behaviour in real time. That could be a box in a car that tells us how the car is being driven, it could be devices in the home telling us if there is a water leak or a power surge, or it could be a collar on a dog that tells us how much exercise or activity a dog is getting.”

By allowing insurers to track their driving behaviours – including average speed, braking force, and distance driven – drivers are able to negotiate lower premiums and other benefits, which many view as a fairer and less discriminatory way of assessing risk.

“As an insurer, we have a responsibility to help make roads safer,” says Kenny Leitch, RSA’s Global Telematics Director. “From a commercial point of view, if we can promote and encourage safer driving on the road then the number of crashes will come down, and the cost to the insurance industry will reduce accordingly – and those savings will be passed on to the public.”

According to Leitch, premiums for 17-year-olds with telematics boxes are half what they were four years ago overall, and national statistics suggest accident rates within this age bracket are also coming down. “Fundamentally, it shows that technology, and technology-enabled propositions, have really reduced claims costs, especially for young drivers,” says Leitch.

‘Black box insurance’ has other benefits too. Many insurers also offer free anti-theft tracking and roadside assistance through the device, and so far RSA has a 100% return rate on stolen vehicles that have a telematics device fitted.

Enter the era of the smart home

With the benefits of telematics so clearly proven within the automotive industry, insurers are now turning their focus to the residential realm – in a bid to create ‘smart homes’ that are intuitive and responsive to internal and external risks. 

For many homeowners, the ability to control their climate, lighting and entertainment devices is one of the main attractions when it comes to home telematics, whereas insurers are drawn to the security benefits offered.

Luckily, telematics-based home insurance offers both parties the best of both worlds – convenience and risk mitigation, all in one handy tech-savvy package.

Smart home = smarter home insurance?

Just as black boxes in cars reward safe driving behaviours with lower premiums and discounts, smart home owners could reap the benefits of an inter-connected abode. From discounts for locking the door and setting the alarm, to a fairer, up-to-date assessment based on moisture, flooding or carbon monoxide monitoring, home telematics can give consumers more control over their insurance rates and premiums, as well as a more in-depth understanding of their utilities usage, environmental risks and overall home security.

What can be monitored in a smart home?

In fact, smart home technology-based insurance has the potential to improve on existing discounts or lower premiums for features like security systems – simply by ensuring that these features are regularly used.

“The connected home is happening, it’s becoming a reality right now,” says Leitch. “People are buying smart switches and systems like 

 … We’re looking to understand what technology we can harness to offer customers an insurance proposition that helps reduce the impact, even eliminate, some claims around water, theft and fire. Those are the initial ones we’re going for.”

What’s next, connected pets?

It may seem like a sci-fi fantasy, but telematics for pets is set to be the next game-changer in the insurance industry, which is no surprise given that around 2.6 million people in the UK have pet insurance.  

Pets are seen as part of the family, and owners spend a considerable amount on maintaining their furry best friends’ health, wellbeing and fitness. But how do we keep an extra close eye on our four-legged friends when we don’t speak their language?

Pet telematics: Going beyond the microchipping process

It’s not as disturbing or invasive as it sounds. All it takes for pets to join the telematics generation is a small GPS device – which is clipped to a collar or inserted under the dog’s skin to record its movements and activities throughout the day.

When paired with a smartphone app, this safe, easy technique allows owners and insurers to monitor pets’ body temperatures, hormones and heart rates, with some even going as far as tracking bowel movements – and this data is collated to form a comprehensive picture of a pet’s health and lifestyle.

Leitch thinks of pet insurance as a wellbeing product – private medical insurance for cats and dogs, effectively. He cites pet obesity as a big issue that results in a lot of claims, so if pet telematics can encourage owners to have healthier, more active pets, he’s for it.

“It’s great for the pet, it’s great for the customer, and it works commercially, so it works all round,” says Leitch.

RSA is currently an active participant in the field of pet telematics, with a product that’s currently on the market, called Waggle Pets. Leitch thinks of it as a wellbeing product – one that stores all the info you need for your pet, from the supplements and drugs he or she needs, to an activity monitor and pet insurance.

What’s in it for consumers? 

The use of telematics in everyday life and activities puts consumers in the driver’s seat when it comes to their insurance policies and premiums. By having access to detailed data on their driving, home security and petcare, ordinary consumers can become more aware of the risks around them, which could spur them to change or improve their behaviour.

“Insurance allows people to buy homes, own pets, start businesses, to invest… it underpins the facilities of normal, everyday life. But people don’t want to make claims. People want to be healthy and happy, and not have to deal with the aftermath of an insurance event,” says Leitch. “The common thread across everything we’re doing with telematics is that we’re using technology to create propositions that either prevent or minimise the impact of claim events.”

What about privacy concerns?

While many customers may balk at the thought of having their lives monitored, a recent Deloitte survey has shown that more than half of respondents were willing to share private information for a premium discount. This shows that, although privacy concerns remain top of mind for most, a sizable incentive can override that resistance to transform consumers into adopters. 

However, RSA customers have no need to worry. There are strict guidelines to ensure that all employees adhere to the rules set by the Regulator of the Prudential Regulation Authority (PRA) and we take the matter of customer privacy very seriously.

“There’s a whole generation out there for which trading data for some benefit is a norm,” says Leitch. “If you want to share your data with us and you take steps to reduce risky behaviour, then we’ll give you a great insurance premium. We have an obligation to use that data responsibly. We’ve also got a commercial responsibility. This will only work if we can give enough value back to the customers.”

See the Deloitte report here.

What’s in it for insurers?

Telematics enables insurers to create products and services that accurately reflect customers’ risk.

Perhaps that explains why telematics has become increasingly popular amongst consumers and insurers over the past few years. A study by

 estimates that global insurance telematics subscriptions could exceed 107 million in 2018, up from 5.5 million at the end of 2013. It also predicts that usage-based insurance will represent more than 100 million telematics policies and generate in excess of €50 billion in premiums globally by 2020.

“This foray into telematics is about us seeing exactly what’s out there – who’s doing what, what capabilities are available, and how we can harness that,” says Leitch. “We’re trying to move from an organisation that deals with incidents, and deals with them very well, to one that, when and if it happens, stops those incidents from being as bad as they could otherwise be. Using technology can help us move into that prevention mitigation space, and that’s where we’re going today.”