John Hendel reports on how, in Latin America’s security-driven market, vehicle and asset safety offers competitive advantage
In Brazil, cars can disappear in the blink of an eye—and not just because of their speed. Thieves target everything from automobiles to cargo, especially in big cities like Rio de Janeiro and Sao Paulo where, according to some estimates, a vehicle is stolen every 12 and 3 minutes, respectively. Telematics offers a solution, through the installation of GPS and radio-frequency identification (RFID) tracking devices in cars and cargo.
Some companies have already tapped Brazil’s growing need for telematics technology. Consider the Israeli multinational Ituran, which founded its Brazilian division in 2000 and has since seen its subscriber base grow to more than 250,000. The firm has so far recovered around 21,000 vehicles with a value of around $600 million, according to sales director Alon Lederman.
Of the 2.3 million cargo trucks in Brazil, only around 14% are equipped with on-board technology to prevent robberies. Cargo—medicines, electronic devices, cigarettes, etc—has become an easy target. Drivers themselves are sometimes involved and, as an often non-violent crime, cargo theft does not rank high among police priorities. Drivers are also often independent contractors, sometimes working 16 hours a day, and are not properly trained in security measures. The result: around 13,000 incidents of cargo theft every year, amounting to billions in losses.
As a result, insurance companies are looking for recovery solutions to maintain profit margins. Pamcary, the largest risk-management and insurance broker for cargo transport in Brazil, uses telematics tracking to make transit more efficient and secure. Pamcary considers a range of factors when calculating risk, including type of cargo, the route, the driver’s background, and the shipping value. More than 60% of Brazilian cargo is transported by road, so the country’s economic growth depends in large part on secure transport.
The tracking technology mandate
Brazilian telematics got a kickstart in 2007, when Resolution 245 mandated that all the country’s cars must come with tracking technology installed. Many Brazilians resisted the idea, and the law remained largely unenforced. The technicalities of its execution have been relegated to court battles for most of the past three years. There is “a major concern in Brazilian society regarding confidentiality and individual rights,” notes Ituran’s Lederman. (For more on the Brazilian market, see ‘Telematics in Brazil: Is it for real this time?’ and ‘Emerging telematics opportunities in Brazil’.)
In many respects, the evolution of the telematics market in Brazil has been different from that in Europe or America. In Brazil, the focus has been on theft, while elsewhere it has been on infotainment and emergency services. A negative sentiment built up around the idea that telematics could be used to track citizens as well as cars and cargoes, and the tensions left businesses feeling unsure about the domestic market.
But Brazilians have slowly come to accept the idea of telematics and, as of January of this year, the government proposed a variation on the existing tracking law, giving drivers the option of turning the devices on or off. The revisions evolved out of dialogue among the Brazilian government, automobile manufacturers, and major market players. Consumer concerns were allayed when it became clear that monitoring would only occur with the car owner’s permission.
Changing risk environment
In the meantime, car thieves have also been busy innovating. One new development: The use of special jammers, which hijackers can employ to neutralize the effect of GPS tracking. “The continuously changing risk environment demands continuous creativity in developing new solutions,” says. Darcio Centoducato, Pamcary’s risk-management director.
Telematics firms are responding with anti-jammer tools to counteract the hijackers’ new arsenal. Ituran already sports a device that “allows our equipment to work even under jammers’ attacks,” according to Lederman. More effective anti-theft telematics technology stands to benefit consumers and the Brazilian economy—as well as the country’s growing telematics sector itself.
John Hendel is a regular contributor to TU.
For more on the growth of telematics in Latin America, join the sector’s other key players at Telematics Brazil & LATAM 2011 on September 19-20 in Sao Paulo.
For more on telematics and insurance, check out Insurance Telematics USA 2011 on September 8-9 in Chicago.