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'Telematics' forecast is cheery news ... for insurance firms

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Rise of the Machines Sales of telematics devices are expected to increase by more than 1,000 per cent over the next five years, according to a new study.

Technology market analysts ABI Research said that 117.8 million "onboard diagnostics (OBD) aftermarket telematics solutions" are expected to be subscribed to in 2019, up from 9.5 million this year.

It said the demand for solutions that plug in to OBD port built into vehicles is strongest in European and North American markets at the moment but that smartphone applications will provide increasing competition within the telematics technology market.

"Beyond the 2019 forecast horizon, the window of opportunity for OBD-dongles will gradually close as open factory-installed OEM (original equipment manufacturer) telematics becomes more widespread," ABI Research said in a statement.

"OBD solutions will also face competition from aftermarket telematics solutions based on smartphones connecting directly to the vehicle OBD port via Bluetooth or Wi-Fi adapters. Even standalone smartphone applications are starting to be explored for applications such as UBI (usage-based insurance) and driver behaviour monitoring of truck drivers leveraging the built-in GPS, accelerometer, and connectivity," it said.

"Telematics" – using telecommunications for informatics – is a term most commonly associated with the motor insurance industry. Insurance companies are increasingly recording information via devices in cars that allows them to set insurance premiums that reflect the driving style of motorists. The recorded data is often referred to as telematics data.

Earlier this year competition law expert Natasha Pearman of Pinsent Masons, the law firm behind Out-Law.com, warned insurance companies to be careful to ensure that arrangements governing how telematics data is gathered, managed and accessed do not fall foul of competition and privacy laws.

Copyright © 2014, Out-Law.com

Out-Law.com is part of international law firm Pinsent Masons.

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