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It was the White House that opened the door to technology that can make driving cheaper, safer and cleaner. At the turn of the century, the US government paved the way for various innovative product launches when it announced a major increase in tracking accuracy for GPS systems.
Fast forward 19 years and motorists have been among the biggest beneficiaries from GPS technology developing exponentially. First up were sat-nav systems, helping drivers to reduce both their mileage and their stress levels. Then came ‘black box’ technology — known as telematics — which is installed discreetly in cars to monitor driving. This can be paired with a telematics-based insurance policy which uses data taken from the device to assess how safely you drive and lowers your premium price accordingly.
In the US, the new technology is mainstream with one in five motorists having installed it in 2016. In Italy at least 17 per cent of drivers have telematics and usage-based car insurance policies. But in the UK, only 4 per cent of motorists have taken it up, according to the last available figures.
Ministers should now take action to encourage drivers in the UK to use the technology. At Vodafone we are calling on the government to incentivise people through cash savings. Our research proposes that motorists who take out telematics-based insurance policies be exempted from Insurance Premium Tax (IPT), which is currently levied at 12 per cent. These drivers would benefit from reduced insurance costs, as well as lower fuel costs due to safer driving being more efficient. The research found that this combination could save the average driver £180 a year and younger drivers much more — up to £470 a year.
There are compelling reasons why the government should be trying to get more motorists to use telematics. The technology can improve road safety, especially when paired with a telematics-based insurance policy which takes data from the device to assess how safely you drive and lowers the premium price accordingly. Recent research suggests that 58 per cent of businesses using telematics systems have seen a reduction in speeding incidents and fines. A survey of young drivers found there was a reduction of up to 76 per cent in ‘safety-relevant events’ for those with telematics.
Research from RAC Business also points to significant environmental benefits. By encouraging more efficient driving styles, more than half of businesses using telematics have seen fuel usage drop by between 10 and 15 per cent. In the longer term, there is also the potential for wider societal benefits around the development of smart transport and smart cities.
The campaign to get an IPT exemption for telematics-based insurance policies already has the support of a number of cross-party MPs, industry figures and the road safety charity Brake. As the government looks to become a world leader in the development of Fourth Industrial Revolution technology, ministers should give serious consideration to reducing IPT.
Whether there is any significant cost to the Exchequer from an IPT tax cut would depend on the take-up of usage-based motor insurance products and the demographic characteristics of those choosing these policies. But, in time, such a move could actually boost Treasury coffers rather than dent them. Our analysis suggests that implementing the tax cut could result in more than £200 million of net benefits just from reduced costs associated with death and serious injury from accidents.
Some 19 years after the White House gave the green light to new GPS technology, and ten years after Vodafone Automotive UK started powering the first black box insurance products in the UK, it is time for government to get fully behind the technology. Our research makes it clear that an IPT exemption for telematics-based insurance policies is the best way to do it. By pressing the accelerator on telematics, ministers could finally set the UK on the road to the kind of smarter, safer and cheaper future for motorists that GPS technology has always promised.
Anne Sheehan is Business Director of Vodafone UK
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