NHAI plans to implement the Global Navigation Satellite System (GNSS)-based electronic toll collection (ETC) system within the existing FASTag ecosystem, initially using a hybrid model wherein both RFID-based ETC and GNSS-based ETC will operate simultaneously. Implementation of GNSS-based electronic toll collection in India will facilitate smooth movement of vehicles along the National Highways and is envisaged to provide several benefits to highway users such as barrier-less free-flow tolling leading to hassle-free riding experience and distance-based tolling where users will pay only for the stretch they have travelled on a national highway. A pilot study about a GNSS-based user fee collection system has been done on the Bengaluru-Mysore section of NH-275 in Karnataka and Panipat-Hisar section of NH-709 in Haryana.
But this also opens the door for Car Telematics. Now every vehicle needs to have a GNSS and would now have capabilities of recording car telemetric data.
Telematics in Car
Vehicle telematics is an interdisciplinary field that combines telecommunications, informatics, computer science, electrical engineering, and vehicular technologies to create a vehicle telematics system that functions to collect and derive insight from vehicle telematics data.
A vehicle telematics system includes vehicle telematics devices, which are tracking devices installed into vehicles that facilitate the transmission and storage of telemetry data via wireless networks and the vehicle’s own onboard modem and diagnostics (ODBII). Telecommunications companies manage the transmission of information from the vehicle and telematics provider to computers or mobile devices that can be accessed by drivers and fleet telematics managers.
Vehicle telematics providers typically offer a combination of IoT vehicle telematics solutions, cloud, hardware, and software solutions, including GPS tracking, cloud-based platforms with easy integration for multiple partners, telematics sensors, fleet management software, a streamlined and accessible dashboard with visualizations, reporting capabilities, automated and configurable notifications and alarms, compliance parameters, and real-time Artificial Intelligence integration for early warnings and instant insights.
How does it work?
Telematics devices collect then transmit GPS and vehicle-specific data via cellular networks or satellite communication to a centralized server, where the data is categorized, interpreted, and optimized for consumer user interfaces.
Modern vehicle manufacturers typically embed automotive telematics technology directly into vehicles. Aftermarket GPS devices are also available for installation. This can also be done using mobile phones apps.
Telematics data typically includes such factors as fuel consumption, idling time, location, speed, sharp acceleration or braking, and vehicle faults. Now using this data insurance companies can now better determine the driving patterns of the driver as well as the vehicle condition. This helps to fine-tune the premiums by the insurance carriers. Today, motor Insurance in India is being priced based on parameters like the Make and Model of the Vehicle, its capacity, the geographical use, etc. There can be several other aspects to the use of a vehicle. For instance, customers who use their vehicles for lesser duration or lesser distances are prone to lesser risks, and those who use their vehicles for longer durations and more distances are prone to more risks but today, both sets of customers today pay the same premium for a particular vehicle. There are various parameters to be considered in the assessment of risks that a vehicle is exposed to, such as upkeep of the vehicle, how frequently it is driven, what distance it is driven for, the quality of roads it is driven on, the driving habits of the driver and so on. Consideration of these factors will lead to a more meaningful risk assessment and provide for a more accurate mechanism for pricing.
Advantages of Telematics:
To Customers:
A careful driver who does not cover many miles and drives predominantly during off-peak. hours could see a reduction in the premium. Here the premium is directly proportional to the performance and usage of his/her vehicles/s bringing in transparency and fairness. If one has a telemetric enabled vehicle, it can act as a tracking device—if the vehicle is lost or stolen, it can be found sooner. It can also help emergency services locate vehicles in the event of a crash or other emergency repairs.
Due to connectivity and increased monitoring of the vehicle, there will be increase.
in the security and longevity of the vehicle. Other services like speed alerts, engine
and battery health alert, breakdown call, crash alert, emergency calls, other service
alerts and notifications etc. can also be availed.
To Insurers:
It will help insurers in better segmentation of customers by assessing the risk accurately. Telematics helps insurers estimate more accurately, accident damages and reduce. fraud by enabling analysis of driving data (such as hard braking, speed, and time) during an accident. The data received and compiled can provide insurers with Next Gen analytical insights through predictive analysis. It can help improve profitability of insurer because of better risk segmentation and deliver higher levels of customer insight improving relationship management and increasing retention rates. During accidents, Telematics can automatically send data to an insurance company immediately after the incident, providing the first notice of loss. By rapidly analysing data from sensors on brakes, air bags, seat belts and other systems, the insurer can estimate the severity of the accident. The insurer can then initiate a series of appropriate actions, such as calling emergency personnel, contacting an automobile club, or towing service, reserving and delivering a rental car to the scene or sending a replacement vehicle. The collected data can also help the claims handling process and help reduce loss adjustment expenses. The insurers can also monitor the car health and recommend repair beforehand and reduce its risk and to the insured.
In developed nations insurance companies are rolling out Telematics Programs like:
Pay-As-You-Drive (PAYD): This program bases premiums on the number of miles driven. The less you drive, the lower your premium.
Pay-How-You-Drive (PHYD): This program assesses driving behaviour. Safe driving habits, such as smooth braking and steady speeds, can lead to discounts.
Why hasn’t it gained traction in India till now?
No fault regime: Unlike other countries where the insured is the person driving the vehicle, in India, the vehicle itself is insured. Add to that, no fault liability claims have been factored in the Indian Motor Vehicles Act 1988 wherein accidents with no negligence are to be compensated basis a pre-decided structure. This means that there is little or no focus on individual driving behaviour, which is a key component of telematics-led insurance plans.
Multiple Drivers: In India, a car is used more as a family driven vehicle and hence same car is driven by different persons with different driving behaviour. This makes it difficult to accurately interpret and attribute differing behaviour patterns on same car for insurance considerations as part of the telematics setup. This can be problematic when it comes to accurately assessing risk and determining insurance premiums.
Privacy concerns: Telematics insurance involves the collection and analysis of personal data, which raises privacy concerns for some car owners. While data privacy laws are in place to protect individuals, there is still a perception that telematics technology is invasive and not transparent. This can lead to reluctance among car owners to share their driving data with insurers.
Telematic data interpretation: While telematics insurance has the potential to reduce insurance premiums for safe drivers, not all insurers have the same way of interpreting and using telematics data. This means that since different insurance companies interpret and use telematics data in a non-standardized manner, there is no clear benefit that a policyholder can enjoy, regardless of their choice of insurance company. In India, no claim bonus (NCB) is arrived at based on claim behaviour, and in order to make telematics insurance a success, a tangible benefit like NCB will have to be established at an industry level. Only when the benefits of telematics insurance can be enjoyed across all or majority of insurers, can a tangible benefit be enjoyed.
Cost prohibitive: In India, most car owners are more price conscious than value conscious when it comes to insurance buying. Telematics insurance requires hardware such as sensors and cameras to track and analyse driver behaviour, which can add to the overall cost of the insurance premium. This can make telematics insurance cost prohibitive for some car owners.
Data interpretation accuracy: Driving and road conditions vary widely in India. An event like hard braking on a highway can be easily attributed to driver behaviour, but could also be due to an animal darting across the road suddenly. Such distinction of events and accuracy of tagging cannot be achieved by using telematics alone. Add to that, the complexity in driving patterns due to multiple drivers could further lead to inaccurate assertions while analysing and deducing from telematics data alone.
Why Now??
Technology is now much cheaper and accessible basically telemetric data is now easily available
In the last decade the population of smart cars or connected cars has been constantly growing . With government polices with respect to scrapping and restriction of vehicles older than 10 years for Deisel cars and fifteen for petrol vehicle the trend will continuously grow. The number of connected cars in India increased from less than 300,000 in 2016 to around 1.7 million by 2022. The overall connected vehicle technology in India grew by more than 60% year-on-year in the first quarter of 2023. Hence the data can now be easily collected and transmitted to the insurance company, which can use it to evaluate the risk associated with the driver and adjust premiums accordingly.
Change in Car Ownership Pattern
With economic growth and post COVID there has been a significant growth in car ownership where multi car homes have increased significantly. This is now allowing establishing the primary driver to the car much easier. Also allows for better risk profiling of the risk.
Infrastructure push with respect to better roads
With the government push for better roads and connectivity driving pattern is more predictable allowing for deriving patterns which can help determine the risk profile.
Government push to GNSS for toll tracking
This means every vehicle will try to either have or would have preinstalled GNSS which also mean telemetric information is going to be readily available
Auto Insurance is a legal mandate, which means with an increase in income, their market penetration is going to keep growing. We are also seeing that connected cars are the future. This is making the access to telemetric data more and more easily accessible. India insurance industry is seeing a major transformation with new players coming in. These players will need to offer a more customised products to attract clients. Telemetric insurance can be explored as one of the options to the client. What’s your thoughts on it??
Author: Mukund Singh, Vice President, Xceedance
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of IIA and IIA does not assume any responsibility or liability for the same.