The use of telematics to enable usage based insurance (UBI) programs has been a growing phenomenon outside the Middle East over the last decade. However, many in the industry are still debating whether this data driven approach to motor insurance will go mainstream. Yet few will debate its effectiveness in reducing accidents once launched. In the UK, early programs saw reductions in claims by 30% to 40%. Similarly in the US, early adopters found immediate reductions in claims of 20%. As you will see from the data I present below, the Middle East could benefit greatly through the introduction or wider adoption of telematics based UBI programs – assuming they can replicate the European and US experience.
Middle East Barriers to Telematics
Of course, telematics is not new to the Middle East. The vehicle fleet market has been experiencing a steady growth in the adoption of telematics devices over the past few years, with oil and gas, logistics, construction/contracting and car leasing sectors all using telematics technology in some way or another for operational and management benefits.
From an insurance and road safety perspective, it seems that telematics is a technology whose time has come for the Middle East. With factors such as rising premiums, extremely high accident rates, high fraud rates, an increasing number of vehicles on the road, a large transient workforce and high penetration of luxury vehicle brands, telematics can help insurers quantify and manage their risks in this challenging environment.
Historically, a number of barriers have slowed the widespread adoption of UBI programs across the region, primarily:
- High cost of data transmission
- Lack of unified import and approval processes for telematics devices
- Perceived privacy issues associated with consumer telematics devices
These barriers are quite similar to those experienced in Europe and the US five to ten years ago. The key to overcoming them is to show, by moving to this new insurance model, that the benefits will flow to all stakeholders and especially the community through improved road safety. In fact, you will note below, several jurisdictions are already making headway at overcoming these barriers.
Middle East and Accident Experience
In the Middle East, there are some of the highest motor accident rates in the world and the highest incident of road fatalities. For example, road accidents in Saudi Arabia occur at the rate of one every minute, with resulting annual traffic fatalities of close to 7,000 and injuries at over 39,000 per year. The Kingdom tops the world’s traffic mortality rate at 29 deaths per 100,000 persons. With statistics like these, the benefits to the community would be immense if UBI was implemented.
By contrast, Qatar has seen a declining rate of road accidents, despite an increasing number of vehicles on the road. The decline is due in part to the government there implementing a concerted suite of initiatives related to road safety. In addition to this, Qatar Insurance Company launched a pilot telematics program last year, to enhance road safety through innovative insurance offers and incentives for customers to use this technology. The pilot is expected to evolve into a full UBI insurance plan positively impacting driving habits while building on the ecosystem in Qatar supporting road safety.
Similarly, the UAE has recently mandated emergency call (eCall) technology in all vehicles sold starting in 2018 as part of the country’s overall plan to reduce road fatalities to zero by 2021. The eCall telematics capability will have a range of features to promote road safety and improve response to accident situations by directly linking to emergency services when help is required. The government there has already completed an infrastructure assessment and confirmed the mobile networks are ready to support this initiative.
The Bottom Line
The UBI revolution is fast changing the face of motor insurance around the world and is now knocking at the Middle East’s door. With immense benefits for the community, the customer and the insurer, the conditions in the Middle East seem ripe for the adoption of this game-changing technology.
Andrew Dart is a former Insurance Industry Strategist at CSC. Follow him on Twitter @ITInsuranceGuy.