Impact of Telematics Technology on Ratemaking in the Auto Insurance Industry. Using regression and machine learning techniques

One of the ideas in the vehicle insurance sector that is emerging and expanding the quickest is telematics. Telematics can assist in resolving the problem of conventional risk rating techniques being employed in Nigeria, which are incapable of performing an appropriate analysis of the risk. The purpose of this dissertation is to investigate the impact of telematics technology on rate making in the auto insurance industry in Nigeria. This work adopted the use of questionnaires to reach 250 insured drivers to ascertain their perception and acceptance of telematics rate making. Moreover, telematics data generated provided valuable information including – annual miles driven, acceleration, braking and cornering that can be used for rate making. A generalized linear regression model was used to ascertain the relationship between a target variable (number of claims) and explanatory variables in the study. Findings using the negative binomial distribution show that there is a statistical significance of the explanatory variables to the target variable. A descriptive analysis from the distributed questionnaires to access policy holders (who are drivers from the data collected) perception, further revealed that telematics influences some professionalism among drivers, which they believe to reduce accidents on the road, which will in turn reduces the number of claims they make.