How telematics influences the Motor Insurance Industry?
The world of mobility is changing rapidly. Telematics is a word everyone has heard of by now! Starting as a niche feature, telematics is merging into the insurance and automotive mainstream. Usage-based insurance with telematics is gaining popularity, many motor insurers are beginning to offer it as an option to customers.
The pandemic has driven this change even more, as more people did not use their vehicles to get to work and would wish for usage-based insurance. Furthermore, the new generation of young people is used to pay for usage, like data contracts for phones or car sharing. But what does this change mean, how do telematics and usage-based products reshape the traditional motor insurance industry and how can insurers use it for their benefits?
The internet of things (IoT) and artificial intelligence (AI) are accelerating innovation in the automotive industry, giving new opportunities to improve customer experiences. A focus area within this digitalization movement is telematics-powered usage-based insurance (UBI). But the adoption has been slower than expected for several reasons.
Telematic devices gather data in real-time so that insurers can use these to collect data about a customer’s driving behavior. This leads to data privacy concerns, as telematics devices have to be added or retrofitted to cars, data must be collected, stored. Data often has to be shared with multiple parties before it gets analyzed on massive scales to generate useful insights. If an insurance business wishes to partner or collaborate, this new data stream adds a layer of complexity. A strong insurance platform can help here to organize data streams and collaboration.
On the other hand, the acceptance of information sharing is growing as more technology devices such as smartphones, GPS devices or social media networks are normal in our daily life. The overall usage of data has to be streamlined within the industry, transparency and regulations make a first step in the right direction.
Usage-Based Insurance offers many advantages to insurers, customers, and society.
For example, a telematics device collects data about the customer’s driving behavior and usage. If it detects safe driving behavior, it can reward the customers by offering lower premiums. Linking insurance premiums more closely to actual individual usage allows insurers to price premiums accurately and transparently which often leads to customer satisfaction. This offers especially young drivers, which usually pay higher premiums to get fair premiums based on their driving behavior. It also gives customers the ability to control their insurance premium by reducing miles driven and adopting safer driving habits. Usage-based Insurance plans like pay-as-you-go (based on mileage) or pay-how-you-drive (based on driving behavior), allow customers to stay flexible.
Safer driving and fewer miles aid in reducing accidents and vehicle emissions, which is a benefit for society. The driving insights could even give young drivers immediate feedback on their driving behavior to help them learn safer driving habits. These insights would also allow elders to see how their driving behavior is changing.
Insights through Data
With the introduction of both mobile and devices-based telematics technologies, insurance providers can acquire a pretty accurate picture of their customers’ on-road driving behavior. Insurers can use this information in an individual or collective way to understand how drivers behave at a certain time a day or even while driving a specific vehicle. At the same time, insurers can obtain ample information about their customers’ behavior, which allows them to identify low-risk groups. This provides a powerful tool to access if the customer is worth retaining.
Keen insights through data create a deeper overview of individual risk profiles, as well as reducing the claim loss ratios through faster and intelligent claim handling. Telematics helps insurers to estimate damages more accurately and reduce fraudulent claims through analyzing driving data such as hard braking, cornering, or speeding during an accident.
Understanding your customer helps you to sort them more effectively and allows you to offer personalized motor insurance products that fit the customer’s needs perfectly. To provide outstanding customer experiences and engagement, the products you offer have to be individualized. Personalized products require a holistic overview of the customer, which can be created through the use of data analysis.
In addition to that, telematics solutions often lead to constant customer engagement with the carrier through an app or other devices, to check their usage. Gamification features such as rewards or point-scoring grab attention and paves the way to discourage dangerous driving. Customers with high engagement are more likely to be satisfied with the service and willing to pay more.
As the world of telematics technology continues to evolve, more insurance companies are leveraging their customers’ smartphones. As most people carry their smartphones at all times, it has become a lucrative tool for insurers as it already provides sensors that allow measuring factors like speed, travel distance, or data about the driver like if the owner of the car is driving or the age of the driver. Using an app on a smartphone is therefore the cheapest possibility to implement usage-based insurance.
Next to this, usage-based insurance, which rewards safe drivers is likely to attract less risky customers. Save drivers reduce costs associated with claims, that is why they are more profitable for insurers. A usage-based insurance program is not likely to attract drivers with a lot of accidents or speeding tickets.
Positive selection and improved behavior can reduce claims. Moreover, the data enrichment enables insurance businesses to detect accidents earlier and alert service. The service can then make more accurate liability decisions based on location or time data. Besides that, the First Notification Of Loss (FNOL) allows the insurer to shorten the time of claim management from several days to minutes.
Grab the Opportunity
Insurance companies have to modernize to keep up with the changing motor insurance industry. Telematics and usage-based insurance can help insurers to do that smartly, by using data as an opportunity. Offer customers new experiences that meet their expectations and deliver outstanding service to reach high-intent customers and retain them with telematics solutions. Most customers navigate a variety of services digitally from filling prescriptions to buying groceries to banking. Customers expect a seamless interaction with carriers and the insurance industry is no exception. As a result insurance providers should adapt to meet customers’ expectations.
i2go can help your insurance business to transform digitally to drive new revenue, improve risk assessment and enhance customer engagement. Our telematics solution is designed to create a comprehensive usage-based insurance program for your business, guiding them through each step of the product.
Next to this, i2gos powerful platform as a service allows you to organize multiple integrations through open APIs and organizes companies’ data streams easily.
Learn more about i2gos telematic feature here or schedule a demo to talk to one of our specialists.