Insurers should focus on three areas to win with telematics
Insurance carriers often ask: 'What is the most important thing we should do with telematics?'
I’ve spent a lot of time over the last year talking about how automakers and insurance carriers can come together to improve the experience of automobile ownership for consumers. This is what I like to refer to as “bridging the gap.”
Luckily, the foundational resource for constructing the bridge is already in place and ready to be put to work. I’m talking about data. Data is what will support and power all of this to happen. Data about our customers, data about their vehicles, and data about how the vehicle is used will provide the greatest insights translating to the greatest experience for all involved.
In each case, we talk about the different data points that we see: what features are on the vehicle, how it operates, and how it’s being operated. The important thing to appreciate is this: The information is here, and it’s going to create a lot of opportunities for both insurance carriers and automakers.
In my opinion, things are going to evolve quickly from this point. So, where should we as an insurance industry focus when it comes to telematics and connected car programs?
Consumer experience
While I’d argue that pricing is important, it may not be the most important factor. Pricing doesn’t stand on its own, and plenty of insurers can’t compete solely on price. It follows that there’s a new saying going around. It’s quite simple and effective: Do you.
This saying is about being yourself and playing to your strengths. By applying this mantra to your business, you can better cater to your customers: What are their needs? Why did they choose a particular specialty insurance program?
Similarly, understanding what drives a customer helps inform how to create the type of experience they are looking for and deliver a program that makes the consumer feel valued and protected. Consumers are increasingly looking for a more personalized way of having their insurance priced based on how they drive, and telematics can help them get that.
The opportunities are endless but consider a few points.
Insurers that have their own app should make sure the sign-up process is seamless, using pre-fill and identity management solutions so the consumer enters as little information as possible, and you get accurate data.
Make an offer that is meaningful for customers, whether that’s a premium discount, a contest to win money for their cause, or coupons that they will use and associate positively with your brand. An alternative to an app program, join a telematics exchange. As an example, you can participate in Mitsubishi Motor’s RoadAssist+ program to make insurance offers when it’s top of mind for drivers, within the driving behavior app, or the in-vehicle head unit available on several 2020 models.
Get started
Having the capacity to ingest and normalize terabyte upon terabyte of data, telematics exchanges provide not only historical learnings but also actionable perspectives on both the current and the future landscape of where this exciting field is going. Carriers often ask, “What is the most important thing we should do with telematics?”
The answer is simply this: Start.
We estimate that approximately 12% of cars on the road today are connectable and able to generate data sufficient to power telematics scores and attributes. By the end of 2024 — a mere four years from now — that number grows to a little over 30%. So, that’s one in three vehicles that could be used to generate telematics data, and all insurers have to do is tap into them.
In the near future, connected vehicle data will be streamlined to the point where it can be integrated right into an insurance quoting process. Think about that for a second: Carriers will be able to get rich, telematics data right alongside credit, claims history, and all the other information that goes into a standard multivariate ratings plan.
Moreover, carriers will be able to get that telematics data the first time they see a potential customer, and not after a six-month monitoring period. Insurers that don’t yet have an app and are thinking about getting one: Don’t reinvent the wheel. There are plenty of third-party, quick-to-market options that can help deliver a telematics program sooner than later.
The carriers that know how to work with telematics data in their rating plan will be best positioned to take advantage of all of this new data. There are a lot of carriers today that have never run a production telematics program or filed a rate that utilizes data derived from one.
To be blunt: The market is headed in a direction for very few winners and a lot of losers.
That’s why getting started is half the battle. Launch something: It doesn’t need to be done across your whole book, or even a significant portion of it. It just needs to be big enough to build an organizational competency of working with telematics data, communicating with your agents and customers about it, and knowing how to use the data in order to price competitively in your markets.
Connections and connected cars
I speak to both automakers and insurance carriers on a regular basis about the topic of telematics data and connected vehicles. While there are a lot of different perspectives on what the future has in store for all of us, there is one thing in common: A lot is going to change with the consumer experience of owning an automobile.
Even within the last few months, as a result of the COVID-19 pandemic, we’ve noticed a huge departure in normal driving behavior. When looking back at the week of March 15th, which corresponds to the period when lockdowns and social distancing were put in place across the U.S., there was a 33% drop in drivers on the road, 41% fewer trips taken, and 46% fewer miles driven.
But that will likely change again in the wake of the pandemic with fewer people commuting to an office on a daily basis. Over the next year both as a result of the pandemic and as cars become increasingly connected, we’ll continue to witness a massive change in the way people interact with their personal vehicles and their lives for that matter and underscores the value of having access to real data in real-time.
Telematics programs are already being utilized beyond the traditional rating and underwriting use cases. Carriers — and automakers — are starting to deploy this data in both claims and lead generation.
Automakers are going to look to transform connected vehicle services from simply safety and security to things like in-vehicle e-commerce. They’re going to continue to push the definition of vehicle ownership into things like subscription models and short-term leases. And then whether you believe that the autonomous vehicle is on the horizon or a bit over it, it is coming. When it gets here, it has the potential to dramatically impact all of our businesses and all of our engagement with consumers. Insurance carriers are going to continue to evolve as well.
I look forward to seeing the day where telematics and UBI go beyond a niche offering to something that is truly part of the fiber of all insurance policies. Both industries are going to continue to evolve separately. But what gets me the most excited is truly focusing on how we can come together, evolve, grow and innovate in order to deliver the best customer experience for all.
Adam Hudson is vice president and general manager of the U.S. Connected Car team for LexisNexis Risk Solutions, based in Alpharetta, Ga. He can be reached at adam.hudson@lexisnexisrisk.com.
These opinions are the author’s own.
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