'Big Brother' Takes The Wheel

My wife uses it a lot to check where I am," says Milan Patel, only half joking, as we negotiate the back streets of Southwark, south-east London in his jet-black Mercedes.

Mr Patel is demonstrating what it is like to drive with an on-board gizmo that tracks not only where he drives, but how he drives. Later, he will replay the journey on a laptop showing his speed on each stretch of road and highlighting in red the corner he took just a little too fast.

This is telematics technology and within a few years the hardware that makes it possible will be mandatory in all new cars in the European Union.

It comes as an onboard device that consists of a mobile GPS locator for place and time, an accelerometer to capture g-force measurements and a chip to collect these data and speed measurements. The chip also knows how to combine the data and when to send it by mobile signal to the operator's servers.

Its use is widespread in commercial vehicles. Lysanda, the technology company Mr Patel works for as an on-the-road technical support man, makes most of its sales to logistics groups, such as TNT, which has a vast fleet of vehicles and delivery schedules to manage – and, of course, drivers to keep an eye on.

However, Lysanda reckons next year will see a much bigger push on the consumer side, mainly as a tool for insurers to charge more accurate premiums to individual drivers, especially the young.

Those sold on the technology have great hopes for the possibilities it holds. The least of these is potentially cheaper motor insurance – premiums in the UK and elsewhere have been rocketing due to fraud, higher bodily injury claims and the lower damage threshold for write-off with modern sophisticated cars.

The much grander hopes are that telematics can make roads safer by incentivising better, more patient driving and help the environment by reducing CO2 emissions. At lower speeds and with less sharp breaking or acceleration cars simply burn less fuel. People may also drive fewer miles.

Geoffrey Finlay, chief executive of Lysanda, says his company's main selling point has been emissions measurement through analysing driver behaviour and the promise of fuel-cost savings. "Small changes to driving style can mean 15-20 per cent savings in fuel economies without impacting driving times," he says.

The technology does have a basic problem from the consumer side "there is a touch of "Big Brother" about it, as Mr Patel admits.

However, consumers contacted by the Financial Times who have used versions of the technology for their insurance in the past were unbothered by being followed everywhere. Ben Craven, a 48-year-old from central Scotland, used it for three years. "If I'm doing something I'm ashamed of, that's my look-out," he says.

Peter Burrows, the finance director at a UK mutual life assurer who describes himself as a "low-mileage, 40-year-old accountant", says he liked the idea that if he was in an accident, someone would know straight away.

Mr Burrows also thought more about what time of day he drove. Most accidents happen late in the evening, or at night, and so driving at that time attracted a much higher insurance premium. As an insurance man – albeit on the life rather the motor side – he also sees the potential social effects. "Purely by making people aware of the risks they are running can only improve their behaviour," he says.

Research backs this up. Accidents have been forecast to decline by a greater proportion than mileage driven under pay-as-you-drive type insurance because the riskiest drivers who pay the highest fees will have an incentive to drive less, according to a paper for Canada's Victoria Transport Policy Institute, an independent research group.

Aviva, the European insurer, introduced telematics early, but then dropped it a few years ago. It failed to sign up enough drivers to make it really profitable. The boxes then cost upwards of £400 – not far off the annual premium of a sensible, middle-aged driver. On top of that was a costly installation, involving a qualified fitter removing a section of dashboard to hide the device behind.

Simpler versions are offered by Nedbank in South Africa, Coverbox via various insurers in the UK and Mapfre in Spain. But even sophisticated devices will soon cost as little as £100 and will be much easier to install – if they are not already in a car. The gizmo in Mr Patel's Mercedes is little bigger than a matchbox and is stuck away under the steering column, plugged into the digital On-Board Diagnostics port that exists in every petrol car made since 2000.

The UK already has a pure-telematics insurance company, called Insure the Box, which was launched just under two years ago. The insurer specifically limits mileage to 6,000 miles per year. After that, the customer has to renew.

Mike Brockman, chief executive of Insure the Box, explains that mileage is limited because of the people he is targeting. These are housewives, second cars and young drivers – all lower mileage and all badly served by many insurers. The young face the most punitive insurance rates, especially 17-25 year old men, who are at the greatest risk of causing accidents and fatalities.

"Insurance classifies people in boxes," Mr Brockman says. "Telematics is the first thing to give people in a bad box the chance to get out of that by behaving better than expected and also the first thing to help bad drivers become good."

Mr Brockman admits his company is still working out what to do with all the data it collects. Some of the obvious stuff is about speed. "We think it is much safer to drive at 80mph on a motorway during the day, which is 10 miles over the speed limit, than it is to drive at 50mph on a dark country road, which would be 10 miles under the limit," he says. He will not be exact about what speeds will see his company penalise drivers – with punishment meted out through the loss of bonus miles the customer starts with each month. But he says they do penalise for driving for more than two hours, or if they detect a lot of sharp breaking and accelerating, which signals dangerous tailgating, especially on the motorway.

This last effect is measured with the accelerometer, the element that gives this technology a sense of inevitability from an insurance point of view. It cannot only detect a crash, but also to say a lot about its character.

This can help save lives through more rapid and crucially better informed emergency call-out. But it could also solve a big part of the crash for cash fraud that motor insurers increasingly face.

"We had a customer who just bumped into another car in her local supermarket car park," says Mr Brockman. "She did the decent thing and left her details for the other car owner, but we then get a third-party claim for three bodily injury cases. Well, we know we can fight that one."

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