Auto-insurance experts are falling into two camps regarding the future of telematics: good drivers will choose telematics policies that will ultimately be cheaper than classic policies, or bad/new drivers will choose telematics policies to build or improve their experience before switching to a classic policy.
Celent outlined these two hypotheses, termed "self-selection hypothesis" (good drivers opting for telematics) and "null hypothesis" (bad drivers choosing telematics) in a recent report, "Innovation in Focus: The Great Telematics Experiment."
According to the report, the null hypothesis assumes that drivers and car owner will prefer classis auto-insurance policies. "Here, we assume that customers don't want insurers spying on their movements, that capturing the data is expensive and that the data doesn't provide significant advantages in pricing and underwriting," Celent states.
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