THE PHILIPPINE Insurers and Reinsurers Association (PIRA) said it would consider data evaluation based on telematics, a technology used in mobile phones to detect and analyze driving behavior, in replacing motor tariff and promoting insurance technology or insurtech.
Risk advisor Simon Lee of Deloitte recently told PIRA in a webinar that the tool provides a driver score by collecting seven types of data: speed, acceleration, mileage, braking, time of trip, cornering, and location. A score of up to 100 as excellent for each category determines whether a driver is safe or dangerous.
With the use of GPS in telematics, Mr. Lee said drivers can be alerted on accident-prone roads, allowing them to take safer routes.
“It’s very timely because we’re in the middle of our debate whether to continue the tariff or offer an alternative. To my mind, this is a perfect alternative to that and I hope this is going to feed to the discussion,” PIRA Executive Director Michael F. Rellosa said.
Motor tariff is the amount shouldered by the insured before their claims are processed.
According to the Insurance Commission, private car owners must pay a minimum deductible of P2,000 or 0.5% of the sum insured (SI), whichever is higher. For commercial vehicles and motorcycles, the requirement is P3,000 or 1% of SI, and P500 or 1% of SI, respectively.
Citing data from a client in Japan, Mr. Lee said it was able to offer 25% less in premiums and reduce claims to 17 in a year using telematics. Meanwhile, he said a client in Portugal improved its customer retention by 23% and loss ratio at 19% annually.
As the drivers become more aware of their dangerous driving behaviors using data from telematics, Mr. Lee said insurers can also offer customer rewards which develop loyalty to the company.
“Based on frequent interaction with the client, these programs were proven to have greater influence than tariff discounts on driving behaviors,” he said.
Motor tariff discounts provide at least 0.75% of SI or P3,000 for private vehicles and 1.50% of SI or P4,500 for commercial vehicles.
“It’s really interesting. I’m sure we’ve opened their eyes to this possibility. We do have that sandbox thing in place and probably we could use that to introduce this new way of serving our clients,” Mr. Rellosa said.
In June, the Insurance Commission (IC) issued guidelines on the adoption of a regulatory sandbox framework, requiring insurtech firms to secure approval from the regulator.
A regulatory sandbox is a controlled environment where a licensed insurance provider will set up a system to allow “small scale and live testing of technical innovations” in different scenarios.
The sandbox should be operated in experimentation cycles that will have to be approved by the IC, with a maximum period of one year with period extension of up to six months.
Applicants will also have to submit an “exit plan” from the regulatory sandbox that will contain a methodology of scaling up the project for a larger market; a plan for clients in case the proposal is discontinued; and the amount allotted to implement the technological solution that shall be intended as payment for any claims arising from said implementation or adoption thereof, which shall be unimpaired at all times.
“I think this could help in the development of underwriting through the use of insurtech. Maybe, we will expect this initiative from the industry,” IC Claim Adjudication Officer Alwyn Franz P. Villaruel said. — K.K.T. Jose