Extracting value from data generated in a connected insurance program: the long-term vision

There are many immediate benefits to launching a connected insurance program—from higher customer engagement and loyalty with rewards, coaching, and reduced claims, to new revenue streams thanks to innovative insurance products. But the jackpot, truly, lies in the long-term vision. To maintain profitability in the long haul, motor insurance companies should already think two steps ahead, reconsidering their data approach today to reap benefits tomorrow.  

What you'll learn

Analysts expect the global data monetization market to grow from USD 2.3 billion in 2020 to USD 6.1 billion by 2025. To grab their share, forward-thinking car insurance leaders readily integrate smart data analytics into their strategies. Especially that, considering the vast reserves of data collected from various sources, they are in a perfect position to reinforce their competitive advantage using data. 

The low-hanging fruit of the data investment lies in plain sight. By reaching out for it, insurers can maximize revenue with new services, optimize costs through better insights and automation, and compel existing customers to stay longer and buy more using personalized products and offers. 

However, even though the huge volumes of data powering connected insurance programs might be manageable now, a question remains about the not-so-distant future. ‘What will I do with the vast amount of mobility data I’ve gathered?’, ‘How can I get maximum return out of my data investment?’ Answering these questions will unlock endless returns from data in the long run.

Turning driver behavior data into new revenue streams

Running AI models and algorithms over augmented driver’s behavioral analytics data is playing an ever-increasing role in the future of car insurance. Obtaining highly-specific profiles delivered per trip, driver, and vehicle, and based on modern insurance telematics provides the means to enhance and inspire innovative insurance products and forge new paths to maximizing revenue. 

With time, insurers will have the opportunity to build massive data lakes of mobility data. Together, they will divulge things about each customer, such as the typical driving distance per month, the time of the day they typically drive, the average distance of trips, and the type of drivers they are (speedy, aggressive, safe, etc.). This adds to claims they generate and personal information such as gender, age, years with driving license… With all this data, revenue-generating ideas emerge, allowing insurers to anticipate customers’ every move and tailor products and services accordingly. Let’s explore some of them.

Launching new products based on mobility needs and profiles

Usage-based insurance— in all its different forms, e.g., also known as behavior-based or pay-as-you-drive (PAYD)—is experiencing an upward trend. In 2019, out of the 875 million active auto insurance policies in the USA, 20 million were UBIs. Another forecast indicated that by 2023, that number would grow to 52.5 million. By 2026, the global UBI market is anticipated to increase by 27.7%, compounded annually. Add the expansion of the vehicle telematics market, evaluated at over $100 billion in 2022, to the equation, and it’s not surprising that the leading insurance companies rely heavily on UBI programs.

Instead of generic actuarial categories based on demographics, pay-as-you-drive pay-how-you-drive insurance offers a personalized approach to premiums. Employing cutting-edge telematics technology to monitor the driving behavior of insureds gives insurance providers a more accurate picture of how their clients drive. As a result, they can draw more tailored conclusions about customers, rewarding drivers for good on-road behavior by offering more attractive rates or benefits in the context of a customer loyalty program. 

Giving insights for sustainable driving programs

Amid the global warming threats, customers worldwide are becoming much more aware of the ecological transparency and traceability of the companies they choose. Data-driven telematics lends insurers a helping hand here, allowing them to calculate scores and metrics on fuel consumption estimation, eco score, and EV (Electric Vehicle) suitability score based on augmented trip data. In particular, AI-driven telematics can provide the following outputs:

  1. Fuel consumption estimation, using fuel and electricity consumption models based on the driving profile and road topology.
  2. Eco score as an indication of the driver’s driving profile efficiency.
  3. EV score, showing the potential to switch to electric vehicles for a given profile.

These scores can inform various loyalty programs that reward customers for driving green. Furthermore, car insurers can build rewards programs based on eco-oriented parameters by turning the above sustainable driving risk insights into exchangeable points without affecting their tariffs.

Several car insurance companies have adopted such schemes, using telematics to monitor people’s driving behaviors and offer a discount depending on how ecologically friendly they drive. These include Admiral, Progressive, and OnStar.

A few numbers: what Consumers wish for

Insurance companies should promote sustainable behavior with their products
Germany 71%
Austria 80%
Switzerland 81%
Insurance should take sustainable behavior into account for premium calculation
Germany 53%
Austria 60%
Switzerland 62%
Customers for which sustainable products play a role in their insurance choice
Germany 34%
Austria 47%
Switzerland 46%

Running data-driven rewards programs

The ability to satisfy customers in a world where rewards are handed out almost everywhere has arrived in the insurance industry. Generating driver buy-in by an insurance company is sure to increase profits, but only with powerful incentives. That is why automotive insurers seek to build efficient rewards programs for well-performing drivers as a token of appreciation and encouragement to keep up the good work. The most common way insurance companies reward good drivers is, of course, by simply offering premium discounts. But there are more incentives that insurers can use to keep customers motivated to stay and even buy more insurance products.

For example, automotive insurance providers can offer value-added service packages as rewards for insureds for avoiding accidents or driving green. The packages are worth the points drivers accumulate in daily, weekly, or monthly challenges (like covering a specific distance without excessive braking, avoiding speeding for a week, cornering at appropriate speeds, and so on). Using them, they can take advantage of a tailored range of products, such as health, car, life, or property insurance, in a bundle with their automotive insurance, at more beneficial pricing. 

Offering personalized insurance products

The avalanche of new data insights from the combination of advanced telematics and mobile analytics systems takes insurance personalization to another level. By using the right insights, insurers can tailor each stage of the customer journey to an individual driver, from initial research to claims processing. The more advanced data-driven personalization, the smoother and faster the user experience, and the greater chances of purchase upon finding a product that’s in line with the consumer’s needs. But hyper-personalization does not only apply to premiums and insurance quotes. Insurers can also leverage data technologies to develop personalized communications. 

To encourage drivers to improve driving behavior and take advantage of other insurance products at discounted rates, insurers can again tap into enhanced telematics data. Based on detailed, contextual information about each insured, they can send updates about positive lifestyle changes or harmful activities that may affect insurance scores.

A few numbers: benefits for insurers

Insurers reporting revenue increase from personalization strategies
60%
Insurers quoting increased customer retention from personalization strategies
81%
Insurers believing hyper-personalization is essential for success in the next two years
68%

Preventing claims by increasing driver’s safety and reliability

Safer driving equals less loss on the bottom line, and one of the reasons is a decrease in claims and their faster settlement. By collecting driver data enhanced with detailed insights about the car, weather, surroundings, and other factors, insurers can identify the areas of the highest risk specific to a particular customer. Using that knowledge, they can better understand which areas to target to mitigate risk and lower the chances of submitting claims.

And not only that. Detailed information about each road event and driver is the insurers’ weapon against fraud. Data collected by telematics devices provides undeniable evidence, which helps evaluate the claim’s legitimacy with greater accuracy and less time, and, in effect, protects the insurer’s revenue. As cyber threats and fraud types are bound to become more sophisticated, insurers have no choice but to embrace data to fend off the danger before it’s too late.

Cross-selling products and services based on user insights

We all know the power of Netflix or Amazon recommendations and how efficient they are in keeping consumers involved. Data-driven mobility analytics uses a similar principle to empower insurers to sell more products and services. An accurate assessment of a policyholder’s profile makes it possible to anticipate customer needs and suggest broadening their existing scope of services according to what has been found based on data. 

Additionally, blending mobility analytics with chatbots, dynamic dashboards, or interactive mobile apps can inspire new, innovative products and services that strengthen customers’ incentive to buy insurance products. For example, a self-service app is an efficient medium to inform customers about their available product options and promote cross-sell by aggregating diverse products and information. For example, a client with only car insurance may see a personalized suggestion for health insurance in the app and ask for a quote, or vice versa.

Launching effective driver coaching programs

Coaching for driver safety and efficiency can be an exciting opportunity for insurance companies looking to generate savings and improve their competitive edge. Based on individuals’ driving patterns, insurers can identify data clusters to group drivers according to the common behaviors they demonstrate. This clustering then provides the basis for a more precise driver coaching that helps address individual mistakes and inefficiencies. 

With the telemetry of each trip, insurance providers can investigate specific incidents, capturing both transient behaviors and habitual driving styles. Telemetry-based information then serves to provide drivers contextual suggestions on how to drive safer and more efficiently. And more data than in traditional systems means more coaching available, which can equate to better driving in more situations, which eventually leads to the end goal–fewer claims and incidents.

Need proof? Here’s one. As a result of using video-based driver coaching, ArcBest (a freight transport company with almost 7,000 drivers) has seen a 13% reduction in preventable accidents, leading to fewer losses. 

Key takeaways: The cost of acquiring new and retaining existing clients in the insurance industry is continuously rising. As a result, insurance companies actively seek new ways to monetize the existing customer base in response to these trends. By leveraging available driver and trip information, modern insurance telematics solutions allow them to do it, paving the way for new, innovative, and revenue-boosting products and protecting their revenues for the future.

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