Black box is motorists' guardian angelA telematics black box in your car not only calculates premiums by usage, but may also save your life, says Jacques Amselem, CEO of Allianz Telematics.
Jacques Amselem: The “black box insurance” is known by different names such as Usage Based Insurance, Smartbox, Pay As You Drive or Pay Per Use (PPU). The actual device, the black box, is usually installed somewhere inside the car, for example under the dashboard.
For now the system is similar to the black box in an airplane; it serves as a kind of trip recorder. It collects data on kilometers travelled and, with the help of GPS, computes in real time other relevant data like the location, speed and type of the road. In the near future it may not be anything more than a software application that can be embedded in your smart phone.
The information is transferred to and processed by a dedicated land infrastructure using secured wireless networks.
So the concept is that drivers pay per use of their car?
Right. The technology allows for total flexibility. There is no flat price anymore. That means whether you leave your car in the garage or drive 100,000 kilometers every year really matters. On the other hand, the insurance company is able to monitor the real usage and can adjust the premium accordingly.
The data collected can be used in various combinations to help identify the best scheme for one’s driving pattern. So, for example, if you don’t drive at nights or weekends, you can get a discount on your insurance premium because statistically the risk of accidents is higher in those time frames.
The advantage of this technology is that it enables dynamic (almost real time) premium adjustment. If we keep the same example as above; one could design a product providing a saving of X euros each night or weekend you haven’t used your car. In other words you would make an upfront payment and, by the end of the year, get a refund or a discount on the following year’s premium.
Experience has showed that economic incentives can make people change their driving habits.
A test was done in the Netherlands some years ago to understand if congestion, traffic and its consequences like CO2 emissions and accidents could be reduced. The reward was five euros every time a driver avoided the rush hour. The results were excellent.
The exact same concept may not be viable from an insurance point of view but eco-friendly driving can be a very interesting parameter to use for new products and tariffs.
Is there any country that has made the telematics systems mandatory?
So far, no. There is an initiative in Italy as well as in some states in the U.S.
What is going to be mandatory though is the emergency call function. In 2012, the European Parliament decided to mandate the installation of such a device starting from 2014-2015 in all new types of approved passenger vehicles.
How much does the telematics system cost the customers?
Depending on the services prices can vary but are usually in the range of 100 euros. Customers pay a yearly fee including everything: installation, black box, telecoms, and services.
What’s the feedback from customers so far?
The system has been in operation for five years in more than 80,000 vehicles across nine countries and we can see clear trends.
On the one hand, customers perceive a strong value from location-based services and, on the other hand, the pay-per-use policies are considered as a fair and transparent way of calculating tariffs. Customers realize that they pay for their own risk and not for the risk of others. With the black box on board everybody can show he or she is a safe driver and, as a result, gets access to significantly better conditions.
I also think the black box has a psychological effect. It’s a mutual trust relationship. Drivers know their insurer can check their driving habits. The first studies show this has already led to shrinking accident frequency and severity figures.
And it’s these benefits that make customers with Telematics in Italy remain longer than those without Telematics (the lapse rate of the Telematics portfolio is approximately half of the classic one).
We have been very careful implementing the end-to-end infrastructure; data security and confidentiality have been at the center of our design. Furthermore, we decided, as a principle, that the data we collect shall not be used against the customer. We believe that our mission is to provide protection to our customers, not to replace the police.
Apart from this company rule, data privacy is part of the law in most of the countries and we therefore strictly implement it.
Apart from flexible tariffs, what else can the Allianz Telematics system offer?
So far our retail customers can also get emergency/accident and breakdown assistance, stolen vehicle tracking and recovery, but there is a lot more to come.
Our fleet managers’ customers can monitor their vehicles through a dedicated application portal which has proven to help them increase the efficiency of their business and provide positive economic benefits.
How do these services work in an emergency?
You just have to push a button in the car and you get connected with the service center. The black box sends the exact location of your vehicle and opens a hands-free voice call. This manual emergency service saved the life of one senior customer who suffered a heart attack while driving. He wasn’t able to speak but the service operator could locate him and deploy the ambulance.
A built-in accelerometer calibrated to detect strong impacts can automatically trigger the emergency service call. This has proven to be very efficient.
For example, one customer fell unconscious at the wheel. When his car hit the security rail the accelerometer triggered an emergency call. When he came round he heard the voice from the operator. He said he thought he was “hearing the angels speaking to him”.