"Telematics as a car insurance product has never really taken off in the region, but there is a potential for a higher adoption rate with the right business model, says Mr Frederik Bisbjerg of Qatar Insurance Company."

1. 38 Middle East Insurance Review July-August 2018
Cover Story – Motor
O
ne of the main reasons telematics never really took off is not because
drivers feel that they are being monitored, as most analysts might
conclude. Rather it is due to the current model being built on the
‘sticks first, carrots later’ concept. It is either ‘you must have it in order to get
insurance’ or ‘if you drive well, we’ll reward you (later)’.
Most insurers try to sweeten the deal by offering value-added benefits such
as car health monitoring, car finder, competitions and rewards for the best
drivers, among others.
The ‘stick first’ approach is a great way of offering young or high-risk
customer segments an affordable way – or the only way – of getting a car
insured and this is how most car insurance telematics products are sold
today. Not many consumers choose to have the device installed in their car
just to benefit from the ‘carrot later’ promise, as an immediate reward is
usually more appealing.
The downside of telematics
Buying a car insurance based on telematics will require the driver to drive
safely for a reward that may come in the future, if at all. This is why many
policyholders refrain from buying telematics car insurance.
The effect of the ‘carrot later’ offering, where safe drivers pay lower
insurance premiums, is questionable, especially since new customers are able
to get a no-claim discount. The no-claim discount is a great example of giving
customers the ‘carrot first’ – offering them a discount on their car insurance
Is there a future for telematics
in the Middle East?
Telematics as a car
insurance product has never
really taken off in the region,
but there is a potential for
a higher adoption rate with
the right business model,
says Mr Frederik Bisbjerg of
Qatar Insurance Company.
Motor.indd 38 12/7/2018 11:10:55 AM

2. July-August 2018 Middle East Insurance Review 39
Cover Story – Motor
if they can document a history with no claims, which
implies that they are safe drivers.
Furthermore, the no-claim discount requires just a
piece of paper for documentation, whereas telematics
devices would require physical installation in the car
or require policyholders to download and use an app on
their smartphones. Clearly, the no-claim discount is a
more popular and convenient option.
There are other issues that affect the adoption rate of
telematics in the GCC region.
Installing a telematics device is still fairly expensive
and the technology relies on data usage, which is costly in
the region. Outside the GCC, insurers shoulder that cost
as they expect the customer to stay on for more than six
years and consequently, recoup their investment.
However, residents in the GCC countries typically
stay for an average of less than four years, making it
impossible for insurers to make long-term plans.
Outside the GCC, car insurance telematics are also
widely used to determine the cause of accidents, among
others, reducing costs for insurers. Conversely, in the
GCC, the police typically determines the cause, which
rules out the opportunity to use in-car diagnostics to
determine the details of an accident.
Telematics still have a role to play
Not all is lost for telematics in the Middle East. As cars are
becoming increasingly technologically advanced – most
new cars today have built-in telematics capabilities – there
is a potential for enabling telematics-based car insurance
without any hassle.
Telematics apps are also better designed now as they
are able to register data as precisely as, if not more than,
the OBD boxes. Such apps are able detect if a driver
is using his mobile phone while driving – 80% of all
accidents are caused by distracted driving.
Both in-built solutions and apps will reduce
insurers’ costs of offering telematics car insurance
products. The million-dollar question is how insurers
can persuade policyholders to shift to the telematics-
based insurance products.
The only way to increase user adoption of telematics
is to reward policyholders for accepting telematics-
based car insurance upfront by providing a significant
saving from the first day a telematics-based car
insurance is purchased.
This comes with challenges for the insurer as some
drivers who end up taking the reward upfront may be
unsafe drivers and therefore they are not eligible for the
discount. Also, after getting the discount (reward), some
policyholders could be inclined to turn off the telematics
device by either removing the ODB-device or simply
turning off the app.
These are issues that must be recognised, but they
can be dealt with in a manner that is fair for both the
policyholder and the insurer. Insurers can constantly
monitor the driving behaviour of policyholders and
communicate with them if they are not meeting certain
standards, following which penalties could be imposed
if the driving behaviour does not improve. This could be
anything from increasing the premiums mid-term or in
extreme cases, downgrading the full insurance to the
mandatory third-party liability insurance.
There is strong case for a telematics product in the
motor insurance sector in the GCC region, but it must
be based on a ‘carrot first’ business model to secure the
required uptake in the markets.
Since the concept is still new in the relatively under-
developed insurance markets in the GCC, it would have to
be presented as a very attractive alternative to conventional
insurance products to increase adoption rate.
Mr Frederik Bisbjerg is executive vice president - MENA Retail | MENA Motor
Claims at Qatar Insurance Company.
To order, please visit www.asiainsurancereview.com/eStore
The Insurance Directory of Asia is the one and only regional
insurance directory covering 27 countries carrying information on
supervisory authorities, insurance associations, education & training
institutions, plus the life and general insurers and reinsurers in each
market with details on senior management, classes of business
written, financial indicators, head office & regional office details, and
share capital.
* All rates inclusive of handling and mailing charges
Print + Online
Singapore / Malaysia* SG$480
Others* US$480
Insurance Directory of Asia 2019
Motor.indd 39 12/7/2018 11:11:03 AM