How insurers can leverage telematics for better customer experiences
Carriers have access to the most personalized information ever available about customer behavior.
There is no asset more valuable in the insurance industry than data. Because it informs nearly every process — underwriting, risk assessment, new business, and more — having quality data is of the utmost importance to insurance carriers.
Traditionally, carriers relied on readily available information, such as tax history or driving records, to determine policies and pricing for their customers. But today, carriers have access to the most personalized information ever available about customer behavior. This means that they have the most accurate data to better determine risk and price and deliver optimal customer experiences.
So what turned the tide in insurance data gathering? It’s simple: Telematics and the Internet of Things (IoT).
What is telematics in insurance?
Insurance telematics started as a strictly automotive feature, where drivers would consent to using a device to monitor their driving habits in exchange for a lower insurance price. The idea was that insurers would be able to get the most accurate information about a driver’s behavior and would reward their safe driving with lower rates.
Property telematics is the next frontier of telematics in the insurance industry. And while these programs are still in their infancy, they promise to help spur the growth of telematics programs and create new opportunities for carriers to deliver optimal experiences to their customers.
How insurance telematics improves customer satisfaction
More accurate & competitive pricing
Because telematics data paints a complete picture of driver behavior, insurers can more accurately price their risk. In turn, insurers get substantial profitability benefits because they are better able to properly match rates to risk.
Accurate risk assessment and pricing also means insurers can offer more competitive prices; the benefits of more accurate pricing are passed to the consumer. This creates a virtuous circle – as the carrier gets the financial benefit, they can encourage customers to enroll in this benefit, and then drivers are urged to pay for this benefit. This structure creates a competitive advantage for insurance carriers who use telematics, as they can offer lower rates and get customers who are lower risk, more careful, and ultimately safer on the roads.
Improved pricing transparency
The beauty of telematics programs, especially in automotive insurance, is that they create a transparent feedback loop to show drivers how their risk influences their price. This also gives insurers the ability to have a better relationship with their customers, as the two parties can discuss the specific reasons for their rates. Having an open line of communication and explaining to customers what risks are influencing their price provides an opportunity for fairness and clarity around pricing.
Mitigated repairs
With automotive telematics data, insurers collect vehicle performance data and can alert drivers to performance issues or parts that will soon need maintenance. Property telematics works in a similar fashion, as sensors are typically placed around the most sensitive areas of the home such as basements, under sinks, and near water heaters or furnaces. With this telematics data, insurers can alert their customers that their boiler is about to go, saving them from the unpleasant surprise of no hot water.
Closer relationships with customers
When you think about property telematics specifically, these programs require people to voluntarily put sensors in their homes. By definition, the homeowner has to invite the insurer into the home, which is a unique concept for a carrier. Typically, insurers don’t go into a customer’s home; property telematics programs change the dynamic between the carrier and the policyholder and create a much more personal and open relationship.
Coaching ideal behaviors
Because of the added price transparency and personalized service customers receive through a telematics program, insurers can motivate customers to achieve their goals through timely nudges. An insurer using telematics can provide constructive feedback to customers, potentially in real-time, giving them opportunities to improve their pricing. This creates a fundamentally different touchpoint for insurance organizations when it comes to customer relationships.
Improved customer engagement
When you combine many of the aforementioned benefits — improved pricing transparency, personalized service, open customer communication, and a closer insurer/customer relationship — the result is bound to be improved customer engagement. With telematics programs, insurance customers get to be active participants in their insurance underwriting process. They reduce their risky behaviors, get coached on their behavior, and even find out about repairs or issues before they occur. From the perspective of an insurance company, this would be an ideal level of customer engagement.
Property telematics is still in its infancy, but many expect these programs to become a must-have when buying property insurance. Not only will this data better inform underwriting and pricing, but it’s also intuitive — instead of guessing what’s going on in a home or what might happen, property telematics can deliver a real-time data stream about what is happening in the home and any risks that occur. This gives owners alerts and a mechanism to act on, and peace of mind that their insurer is looking out for them.
Andy Yohn is the vice president of product management and co-founder of Duck Creek Technologies. Contact him at andrew.k.yohn@duckcreek.com.
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