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Local insurance industry slow to embrace new technology

By Gerhard Botha

Telematics and big data have generated much interest globally within the insurance industry. Yet, there is still reluctance amongst some SA insurers to adopt these practices. While local firms have the capability and know-how to implement, the low margins seem to compel them to remain conservative.

The prevalence of fraud in the industry has also necessitated many insurance firms to focus on security and other preventative measures, instead of investing in the likes of telematics and big data. Limited budgets mean that these technologies are simply not on the priority list.

Scepticism around the benefits that these provide, coupled with questions around their robustness and

Gerhard Botha, CTO of PBT Group
Gerhard Botha, CTO of PBT Group

trustworthiness, is part of this hindrance. Certainly, telematics is useful to understand behaviour but it is also very easy to manipulate.

On the big data side, many insurers do not see themselves as having large volumes of information. Many of the decision-makers feel that their current data management technology is sufficient for any analytical needs they might have. However, there still remains a demand for more skills to understand and exploit existing data assets.

Of course, as with any new technology, the biggest concern revolves around the connectivity required to implement and monitor it properly. Data in South Africa remains expensive and, at times, sporadic. With both telematics and big data requiring high volumes of data to be transferred, there is simply no capacity and reliability to work with a reasonable safe level of trust.

And you cannot forget the grudge purchase aspect of telematics. It requires technology to be installed in customer vehicles – and people still argue ‘why they should pay for something they do not want’. Additionally, telematics is of limited use to insurers because of its sensitivity to isolating poor driving behaviour. For example, through telematics it is difficult to determine if someone is racing or just changing lanes in dense traffic and therefore should be paid out by the insurer, should an accident occur.

However, with telematics expected to merge with the Internet of Things (IoT), more investment will be made in ensuring the stability and effectiveness of the technology. This is also contributing to the development of tools such as accelerometers, pressure gauges, speedometers, and location sensors to add to the value proposition of both telematics and the IoT.

And while we are still some time away of it being implemented, self-driving vehicles could significantly impact the insurance industry. This will also mean that significant telematics and big data technology would have to be rolled out.

However, even though companies are slow to adopt telematics and big data, there are positive signs. With a few insurers already developing customer solutions around these and others launching pilot projects and proof of concepts, this could be an exciting year for the South African market. Of course, whether customers will embrace these innovations remain to be seen.

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