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Telematics insurance usually works by setting up in the vehicle a device, termed usually as a Black Box, which records different metrics of the latter, such as speed, distance, and the type of road one travels. This device also monitors the braking pattern and driving style, which is utilized by insurance companies to compute the premium accordingly.
Insurance telematics poses the potential to alter the current scenario of motor insurance and positively impact claims, risk selection, and fraud detection. As of now, the industry is still at a nascent stage of development, and various studies are being conducted by researchers to explore the broadening of its usage across the world.
The telematics market for industries such as insurance is anticipated to grow steadily in the next few years, due to decreasing cost of connectivity solutions, such as wireless and cellular modules and use of predictive analysis, enabling the end user to produce drive risk scores from telematics data. Consumer’s enthusiasm for in-car connectivity and growth of smartphone penetration are driving the market.
In terms of deployment type, on-premises deployment is expected to dominate the market with the largest market size.
In terms of end users, SMEs are estimated to exhibit the highest growth rate as they are adopting cloud-based insurance telematics solutions extensively.
US is expected to lead the overall market followed by Europe and China. US is rapidly deploying insurance telematics solutions due to the dynamic market environment. Latin America and APAC is also witnessing a record growth in demonstrating and adopting insurance telematics solutions.
Educating consumers about insurance telematics and security issues associated with cloud and mobile technologies act as challenges for the market. However, the privacy concerns associated with private data of individuals and customers are restraining the growth of the market.
Organic growth through partnerships, agreements and collaborations are the key strategies followed by the companies, such as Octo Telematics, Sierra Wireless, Inc., Agero Inc., Telogis, and TomTom Telematics. These strategies accounted for a share of 38% of the total strategic developments in the insurance telematics market.
Mergers and acquisitions strategy accounted for 15% of the total strategic developments incorporated by the top insurance telematics companies, such as Sierra Wireless, MiX Telematics, Telogis, and Trimble Navigation.
The COVID-19 pandemic has resulted in changing demands of insurers from traditional actuarial and underwriting models to pay-as-you-drive (PAYD) models. In addition, increased acceptance of digital tools in the policy binding & claims process among consumers, combined with a need for insurers to design premium policies more precisely are major factors notably contributing towards the market growth.
The insurance telematics market consists of several major players. In terms of market share, almost none of the market players currently have significant dominance in the market. The major players with the prominent share in the market are focusing on expanding their customer base across foreign countries to stay on the top.
Dublin-based RentalMatics, which provides telematics to the car hire sector, has entered a three-year agreement with Queensland-based East Coast Car Rentals as it launches its connected car platform in the Australian market. These companies are leveraging strategic collaborative initiatives to increase their market share and increase their profitability.
The companies operating in the market are also acquiring start-ups working on insurance telematics market technologies to strengthen their product capabilities.
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