Credit: Telematics, an amalgamation of the words ‘telecommunications’ and ‘informatics,’ refers to “the use of wireless devices and ‘black box’ technologies to transmit data in real time back to an organization. Typically, it's used in the context of automobiles .” The Internet of things (IoT), big data, analytics, and cloud computing are inherent features of the telematics ecosystem.
With multiple use cases, the global telematics market is expected to reach $140.10 billion by 2022, from an estimated $26.34 billion in 2015, growing at a CAGR of 28.5% during 2016-2022, according to a report. Here’s why telematics is one of the exciting spaces to watch out for, holding great opportunities for players in telecommunications, insurance, and the automobile industry.
Fleet Management
Telematics technology is changing automobile fleet management for the better by substantially reducing waste with data-enabled trucking management. It is estimated that many trucks idle for 4-8 hours per day, costing anywhere between $5,000 and $12,000 a year in wasted fuel per truck while around 4.2 million drivers spend 110 hours completing paper logbooks.
Real-time information such as vehicle location, speed and mileage is being used by companies to increase productivity, reduce costs, optimize routes, detect maintenance requirement as well as enhance driver and fleet security. A report by AT&T projects that fleet management solutions can reduce idling time by an hour a day per truck, thereby saving over $25,000 a year for a fleet of 20 trucks. It can even help avoid fines which can range from $150 to $25,000 depending on locality fines for excessive idling.
The fleet management market size is estimated to grow from $9.54 billion in 2016 to $27.90 billion by 2021, at a CAGR of 23.9% during the forecast period. Fleet management services and solutions are being offered by companies such as Samsung, Intel, Volvo, Verizon, AT&T, TomTom, Vodafone, Telefonica, IBM and CISCO.
Government Initiative
To enhance and ensure vehicle safety, governments around the world are promoting the use of vehicle telematics. The federal government’s Executive Order 13693 calls for improving agency fleet and vehicle efficiency and reducing greenhouse gas emissions through deployment of vehicle telematics. In December 2015, the Federal Motor Carrier Safety Regulation passed a rule which requires installing Electronic Logging Device (ELD) (to be installed by December 2017) to enhance convenience, tracing, management and sharing of records, thereby improving compliance with the HOS rules.
In the European Union, an initiative - eCall - to bring rapid assistance in case of a collision was proposed and approved by the European Parliament in 2013. In 2015, a regulation was voted in favor of all new cars are to be equipped with eCall technology from April 2018. In UK, the government is promoting the use of telematics technology to help organizations manage their fleets more effectively, thereby improving safety and efficiency. It is estimated that the benefits offered by the telematics technology would be able to save £3 for every £1 spent on telematics.
In addition to the names listed above, companies such as Fleetmatics (acquired by Verizon), Teletrac Navman, MiX Telematics and Trimble are working with various government agencies.
Usage-Based Insurance
The advantages of telematics in vehicles also extend to the insurance sector as it allows the latter to estimate accident damages more accurately, reduce fraud claims, attract low-risk drivers, and reduce cost of claims, among other benefits. As per the Insurance Fraud Bureau, the cost of ‘crash for cash’ scams run by fraudsters is around £340 million a year. Such costs can be substantially reduced.
The benefits offered to insurers and insured have made usage-based auto insurance (UBI) one of the fastest growing segments in the automotive insurance market. In 2015, close to 12 million consumers globally subscribed to UBI, and the same is expected to grow to 142 million globally by 2023, according to an IHS report.
The global usage-based insurance market is expected to garner $123 billion by 2022, as per a report. UBI has several variations, including Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), Pay-As-You-Go, and Distance-Based Insurance with Allianz, AXA, Insure The Box, Progressive, Generali Group, Mapfre, Metromile, Allstate, and Aviva as some of the key players.
Final Word
Telematics is helping automobile manufacturers to improvise vehicle performance and insurance providers to come up with customized products. With multiple benefits that telematics offers, both demand and supply for its products and services are on the rise. However, privacy concerns and cyberthreats pose some challenges to its fast-paced growth. Overall, telematics is not just revolutionizing fleet and risk management, it has opened a new revenue stream for companies to cash on.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
