INTRODUCTION:

Usage Based motor insurance premium is being offered by insurance companies in some developed countries. These companies with the help of some devices fitted on vehicles gather data and scientifically analyse them in arriving insurance premium. The process of collecting data using this device is based on telematics and the devices used are telematics devices. In general the process of transferring digital information over long distance is known as telematics.

Using wireless internet services we can connect many devices together in our lives to coordinate their functions and to optimise their utilisation. In addition to smart phones we can connect even our household appliances.

We can use this transmission of digital information in automobiles as well. This is going to have a great impact on automobile insurance. Telematics used in automobiles is all about the integrated use of telecommunications and IT. It is used for real-time navigation, roadside assistance, and vehicle tracking.

In India, recently, the Insurance Regulatory and Development Authority of India (IRDAI) came out with a discussion paper on ‘Telematics and Motor Insurance’. The paper explains use of telematics adopted in motor insurance in some of the developed economies and its scope in India. Telematics helps in rationalizing premiums based on more objective risk pricing. Under Telematics, the motor insurance premium could be directly proportional to the performance and usage of the vehicle, the discussion revealed. Telematics could be handy in tracing stolen vehicles and prompting drivers about convenient routes, and assist them to have low maintenance cost and fuel economy. At the same time it will also help insurers in better segmentation of customers by assessing the risk more accurately. Telematics will also help insurers in estimating accident damages more accurately and reduce fraud by analysing driving data (such as hard braking, speed and time) during an accident (Times of India ,Aug 6,2017)

CONCEPTUAL BACKGROUND:

The word “telematics” is a combination of “telecommunication” and “informatics”. In general, it is a process of electronic data transmission. Telematics is a branch of information technology which enables long distance transmission of computerised information from persons or objects, with the aid of equipment linked to internet. This device capture and record facts based on physical activity, and then send it to a centralized processor or server where it can be analysed and stored for the long term. Once required data has been collected by the service provider, it is examined to arrive in a conclusion. The use of such systems within road vehicles iscalled vehicle telematics. It is used to surveying location, movements, status and behaviour of a vehicle or fleet of vehicles. Telematics can also be used in many different areas, e. g. medicine (“tele-medicine”) or education (“tele-teaching). (Martin Eling and Mirko Kraf, 2017).

APPLICATION OF TELEMATICS INAUTOMOBILE INSURANCE:

Application of telematics technology can be very useful in motor vehicles insurance. Telematics can help insurers to monitor and record the driving pattern of car drivers. In overseas countries safe drivers are offered lower premium than those who are not having good driving habits. On the other hand it motivates people to practice safe driving habits. (Alok Bhatnagar, chief executive officer, easypolicy.com, 2017). At present, in India insurance premiums of motor vehicles are priced based on parameters like the vehicle’s engine capacity, category, and purpose of use and the age of vehicle. But there are several other aspects can be part of the premium-pricing decision. For example, customers who use their vehicles for lesser duration and distances are prone to fewer risks and those who use their vehicles for longer durations and longer distances are prone to more risks; but both types of customers today pay the same premium for a particular vehicle (the IRDAI discussion paper).

There are few other parameters that must be kept in mind in the assessment of risks with regard to a vehicle, such as: maintenance of the vehicle, frequency of its usage, the quality of roads it is driven on, and the driving habits of the driver. Consideration of these factors will assist in meaningful risk assessment and provide for a more efficient mechanism for pricing.

Moreover, due to the increasing use of other means of transport such as suburban trains, city buses, employer-provided transport and taxis; some people rarely uses their own vehicles. The vehicles of these people may be in a low-risk category.

On the other hand, vehicles involved in public transport and taxi services are prone to more risks as they are extensively used on the roads each day. However, premiums are being calculated based on available information related to limited parameters. If accurate information and more relevant data are obtained, premiums can be calculated more scientifically, commensurate with the risks involved.

SIGNIFICANCE OF TELEMATICS IN MOTOR VEHICLE INSURANCE: IMPACT ON CONSUMERS:

Telematics is a solution to the old system of premium calculation. At present, all customers pay the same premium without any differentiator on their driving behaviour. Telematics will change all that, and the drivers with good past-driving habits will have to pay reduced premium than driver with bad driving habits. Thus, it will also encourage drivers to improve their driving habits and lead to safer roads.(Balachander Sekhar, chief executive officer, RenewBuy.com—a motor insurance portal, 2017).The insurance companies will also get benefit from this technology. With the help of telematics devices they will be in a better position to assess the risks they are underwriting. It will lead to create an improved segmentation of the market. This will allow them to increase or decrease the premium according to an individual insurance holder’s risk profile, thus providing a high degree of accuracy in premium calculation and claim decisions.

TELEMATICS AND PREMIUMS:

In India the current regulations do not allow insurers to provide full-fledged telematics-based insurance policies. There is no provision for factoring driving behaviour in premium pricing. In fact, insurers have no role to decide the pricing of any motor insurance policy. Premium of the third-party insurance component, which is mandatory, is wholly decided by IRDAI. However, even within these limitations, insurers are experimenting by providing telematics-based policies as value-added services; along with add-on policies like 24x7 road side assistance.

In India Bajaj Allianz General Insurance Co. Ltd had introduced its telematics-based offering in 2016, which was made available to private car owners who were buying a comprehensive car insurance policy, as well as some add-on covers like 24x7 assistance. This offering requires the customers to affix a telematics device to their cars. While the insurer does not charge any additional price for this device, the consumer's yearly outgo would go up by Rs1, 500-2,500—compared to a basic comprehensive motor insurance policy—due to the add-on covers. At the time of the launch of this offering, the insurer had also said that the company will use the data gathered using telematics at the time of policy renewal, to determine if the user is a ‘safe driver’. And based on this, a consumer could get discounts on the own-damage part of insurance premium. However, it will take some time to determine whether telematics can reduce car insurance premiums in the Indian market. (Sourabh Chatterjee, head-information technology, web sales, digital marketing and direct marketing, Bajaj Allianz General Insurance)

Telematics- and usage-based insurance products have been launched in Western Europe and the US over past several years and have seen good traction it is also a fact that the cost of premium is higher in these markets. “This helps subsidise the product. In comparison, premium is quite low in the price-sensitive Indian market and in-car device-based products turn out to be expensive,” (Sekhar, 2017) at the same time the cost of telematics devices can turn out to be the biggest challenge for acceptance of the concept.

However, some new business models are emerging. Apart from the device-based offering, Bajaj Allianz has recently launched an app-only version of its telematics offering. This service is available to all its private car policyholders, without any extra charge. The big difference between this and the device-based offering is that it does not provide any diagnostic information about the car. The hardware telematics device, because it is fitted inside the car, also provides information about the health of the car’s engine.

FUTURE OF TELEMATICS IN MOTOR INSURANCE IN INDIA:

The cost of a telematics device is high so it could continue to be a barrier to wider adoption. But, if more insurance companies offer telematics-based products, and it results in reducing premiums for insurances, it would be useful for all. And we have to wait, how the discussion process started by IRDAI and consumers perception towards telematics shapes up.

LITERATURE REVIEW:

Sinisa Husnjak, Dragan Perakovic, Ivan Forenbacher, Marijan Mumdzive (2014) in their research paper“Telematics system in Usage Based Motor Insurance” they explains the effectof telematics system both on insurance companies and consumers. They confirmed that UBI policies may prove useful especially on the emerging markets. In addition, emerging markets have great potential and insurance companies will have to be proactive in introducing new business models. The most critical part for insurance companies is to identify the importance of environmental factor in aligning the individual risk and premium. Telematics solution, already implemented in Eastern Europe and it should prove readily adaptable to other countries. The benefits are various; from economic to social and benefits for consumers. Therefore, insurance companies need to find a way to bring closer UBI insurance policies to driver, either through offering discounts or any other benefits that could attract new users.Therefore, proactive insurers will continually introducenew products such as UBI policies which will in turn reinforce or even increase their market share.

Lukasz Kurylowicz(2016)In their study“Usage-Based Insurance: the concept and study of available analyses”they identifiedThe implementation of UBI solutions can not only generate the competitive advantage necessary on a saturated market but also bring about positive social and environmental consequences. The obstacles faced by insurers introducing UBI were tackled with increasing efficiency and new ideas for telematics insurance emerge on a daily basis, making its implementation easier to apply.

Martin Eling, Mirko Kraft (2017) in their study “The Impact of Telematics on the Insurability of Risks” they identifiedthat a number of problems with the insurability of telematics impede the market development.The true impact of telematics on driving behaviour is not fully explored or at least some ambiguous results might be observed. Both experimental and empirical research might be needed forexploring the risk implications of telematics.

Marika Azzopardil, Dominic Cortis (2013) in their research paper “Implementing Automotive Telematics for Insurance Covers of Fleets” theyhad pointed out inherent advantages of telematics and other UBI over conventional premium pricing. Nevertheless TBI(Telematics Based Insurance) had not been widely accepted by the insurance market, except in highly developed markets such as the United Kingdom (Aviva.co.uk, 2012) and the United States of America (Privat, 2012).They established that fleet owners were willing to adopt TBI and tracking providers aspiring to assist in its implementation. Despite this, TBI for commercial lines of business is not on the main stream. Yet, the perceived benefits should instigate parties to commit themselves to introduce TBI. Insurers would be able to apply fairer pricing while fleet owners would obtain better control of their fleets. They argued that an introduction of TBI translates into benefits to society, insurance industry, as well as to the environment.

Mercedes Ayuso, Montserrat Guillen and Ana María Pérez-Marín (2016) In their study“Telematics and Gender Discrimination: Some Usage-Based Evidence on Whether Men’s Risk of Accidents Differs from Women’s”,they concluded that the lower risk of accidents traditionally observed in female drivers.It is due to the fact that women have a lower driving intensity (drive fewer kilometres per year) and, in general, have less risky driving patterns than men. Whentheycompared the risk of accidents for a man and a woman in the same risk group (where both have a similar vehicle usage and present similar driving patterns), then the risk of accidents was very similar. Also they found that driving experience plays an important role in the risk of accidents.

RESEARCH GAP:

With the insurance regulator (IRDAI) taking an initiative in introducing telematics, it is being expected that many insurance companies could offer telematics-based insurances in India. With this exposure, the process of devising a specific product around telematics will get a boost. At the same time, if insurers embrace the product wholeheartedly and spend some time and effort in popularizing the usage of telematics, customers will be willing to start using telematics in their driving.Many studies have been conducted to understand the factors that positively contribute towards consumer’s perception towards telematics in automobile insurance. Most of these studies were restricted to European countries. Very few research studies have been conducted about telematics in insurance in India and it is an introductory stage in India. So we felt an imperative need to undertake this present investigation.

OBJECTIVES OF THE STUDY

1. To understand the awareness level of Indian consumers about telematics

2. To analyse the perception level of telematics in insurance by consumers.

RESEARCH METHODOLOGY

The study is empirical in nature based on primary data collected from 46 sample respondents and secondary data from published sources. Primary data for this study was collected by using structured questionnaire. Secondary data from published materials was collected from various journals, reports, and magazines. Sample selection was done as per our discretion.

(1) Instrument: For Present study, responses to structures questionnaire were collected using Google form.

(2) Analysis: Both descriptive and inferential statistics have been applied to arrive at the conclusions based on the study. Statistical analysis has been done using PSPP.

HYPOTHESES:

The presents study hypothesises the following based on the objectives:

H1 There is no significant awareness of telematics in insurance among consumers.

H2 There is no association between the socio economic variables and awareness of telematics in Insurance.

H3 There is no association between the awareness level and perception of consumers towards telematics in insurance.

RESULTS:

Table 1: Demographic profile of the Respondents

Variable	Category	Count	%
Gender	Male	19	41.3
	Female	27	58.7
	Total	46	100.0
Age	Below 30	20	43.5
	30 to 50	25	54.3
	Above 50	1	2.2
	Total	46	100.0
Highest Educational Qualification	+2/Diploma	4	8.7
	Graduation	12	26.1
	Post-Graduation	26	56.5
	M. Phil. / Ph. D.	4	8.7
	Total	46	100.0
Occupation	Salaried - Govt or Public Sector	17	37.0
	Salaried - Private Sector	15	32.6
	Self Employed	2	4.3
	Unemployed	12	26.1
	Total	46	100.0
Region of Residence	Rural	27	58.7
	Urban	19	41.3
	Total	46	100.0
Marital Status	Single	20	43.5
	Married	25	54.3
	Divorcee	1	2.2
	Total	46	100.0
Religion	Hindu	34	73.9
	Christian	6	13.0
	Islam	5	10.9
	Others	1	2.2
	Total	46	100.0
Monthly Income	Below Rs 2,00,000	12	26.1
	Rs 2,00,000 to Rs 5,00,000	22	47.8
	Rs 5,00,000 to Rs 10,00,000	10	21.7
	Above Rs 10,00,000	2	4.3
	Total	46	100.0
Type of Family	Joint	11	23.9
	Nuclear	35	76.1
	Total	46	100.0
Type of Residence	Own Residence	42	91.3
	Rented Residence	4	8.7
	Total	46	100.0
Whether Owning a Car	Not Owning a Car	14	30.4
	Owning a Car	32	69.6
	Total	46	100.0

Source: Survey Data

Table 2: Awareness of Telematics in Insurance

Variable	Count	%
Aware	10	21.7
Unaware	36	78.3
Total	46	100

Source: Survey Data

Table 2 reveals that majority of the respondents are unaware about Telematics in Insurance and only 21% of the respondents are aware about the Telematics in Insurance.

Table 3 affirms that there is no significant association between socio economic variables and awareness of Telematics in Insurance except in case of respondents owning a car or not.

The Mean Rank of perception towards Telematics in insurance by using One Sample t test is presents in the table 4. Implementation of Telematics in Insurance would facilitate faster claim settlement is relatively perceived high by the respondents, though all are having relatively high perception on Telematics in Insurance.

Table 3: Association between Awareness of Telematics in Insurance with Socio-Economic variables

Variable	Category	Awareness of Telematics in insurance			Chi-Square	df	P Value#
Variable	Category	Aware	Unaware	Total	Chi-Square	df	P Value#
Gender	Male	5	14	19	0.399	1	0.528
	Female	5	22	27
	Total	10	36	46
Age	Below 30	4	16	20	0.388	2	0.823
	30 to 50	6	19	25
	Above 50	0	1	1
	Total	10	36	46
Highest Educational Qualification	+2/Diploma	1	3	4	0.221	3	0.974
	Graduation	3	9	12
	Post-Graduation	5	21	26
	M. Phil. / Ph. D.	1	3	4
	Total	10	36	46
Occupation	Salaried – Govt or Public Sector	4	13	17	0.983	3	0.805
	Salaried – Private Sector	4	11	15
	Self Employed	0	2	2
	Unemployed	2	10	12
	Total	10	36	46
Region of Residence	Rural	7	20	27	0.674	1	0.412
	Urban	3	16	19
	Total	10	36	46
Marital Status	Single	4	16	20	0.388	2	0.823
	Married	6	19	25
	Divorcee	0	1	1
	Total	10	36	46
Religion	Hindu	8	26	34	0.441	3	0.932
	Christian	1	5	6
	Islam	1	4	5
	Others	0	1	1
	Total	10	36	46
Monthly Income	Below Rs 2,00,000	2	10	12	1.151	3	0.765
	Rs 2,00,000 to Rs 5,00,000	5	17	22
	Rs 5,00,000 to Rs 10,00,000	3	7	10
	Above Rs 10,00,000	0	2	2
	Total	10	36	46
Type of Family	Joint	1	10	11	1.359	1	0.244
	Nuclear	9	26	35
	Total	10	36	46
Type of Residence	Own Residence	9	33	42	0.027	1	0.869
	Rented Residence	1	3	4
	Total	10	36	46
Whether Owning a Car	Not Owning a Car	3	11	14	0.001	1	0.973
	Owning a Car	7	25	32
	Total	10	36	46

Source: Survey Data, # Chi-Square Test, **Significant @ 5% level of significance

Table 4: Perception towards Telematics in Insurance

	N	Mean	Std. Deviation	t value	df	P Value^#
Total Perception towards Telematics in Insurance	46	4.0609	.75879	9.428	45	0.001**
Telematics through "Black Box" would be of great help in assessing driver behavior	46	4.09	.890	8.282	45	0.001**
Telematics would facilitate responsible driving	46	4.20	.910	8.914	45	0.001**
Telematics is a must in the present day trafficking	46	4.02	.882	7.860	45	0.001**
Telematics would reduce false accident claims in insurance	46	4.22	.867	9.523	45	0.001**
Telematics would facilitate faster claim settlement	46	3.78	1.009	5.260	45	0.001**

Source: Survey Data

# One Sample t test

** Significant @ 5% Level of Significance

Table 5: Association between Perceptions towards Telematics in Insurance with Socio-economic Variables

Variable	Category	Mean	F or T value	P Value^#	Inference @ 5% level of significance
Gender	Male	4.0421	0.016	0.899	Not Significant
	Female	4.0741
Region	Rural	3.9926	0.026	0.872	Not Significant
	Urban	4.1579
Type of family	Joint	4.0364	0.398	0.531	Not Significant
	Nuclear	4.0686
Type of Residence	Own Residence	4.0238	0.418	0.521	Not Significant
	Rented Residence	4.4500
Owning a Car	Not Owning a Car	4.0714	0.214	0.626	Not Significant
	Owning a Car	4.0562
Awareness of Telematics	Aware	4.7800	4.019	0.049	Significant
	Unaware	3.8611

Source: Survey Data

# Independent Samples Test

Table 5 shows the association between perceptions towards Telematics in Insurance with socio-economic variables. It affirms that, respondents having awareness on Telematics have a relatively higher perception.

CONCLUSION:

Majority of the respondents are unaware about telematics and telematics in Insurance. And there is no significant association between socio economic variables and awareness of telematics in insurance except in case of respondents owning a car or not. At the same time there is significant relationship between awareness level and perception of consumers.In India the awareness level of telematics is very low and the cost of a telematics device is high so it could continue to be a barrier to wider adoption. But, if more insurance companies offer telematics-based products, and it results in reducing premiums for insurances, it would be useful for all.

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Received on 30.07.2018 Modified on 10.08.2018

Res. J. Humanities and Social Sciences. 2018; 9(3): 657-662.

DOI: 10.5958/2321-5828.2018.00110.9