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:
- Fuel consumption estimation, using fuel and electricity consumption models based on the driving profile and road topology.
- Eco score as an indication of the driver’s driving profile efficiency.
- 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.