Don’t judge a book by its cover: it’s not all about creating another usage-based insurance. Telematics offers a variety of opportunities to speed-up customer onboarding, increase competitiveness, and optimize your customer portfolio.
You read it on every corporate blog, in every specific journal. It’s a hot topic in most InsurTech newsletters: the insurance industry needs to change from the traditional annual renewable car insurance policy to advanced usage-based insurance (UBI) products. Most stories focus on enabling tariffs pricing in near-to-real-time and creating more flexible insurance products.
Although insurance telematics has been around for quite a while, it is still underrated as “a cock that won’t fight.” Why that? The public has not yet widely accepted UBI. In many European countries and other western countries, the adoption rates are meager due to lacking public acceptance of being “tracked” only to earn a slight discount for the following year. Most of the usage-based insurance products stay in their niche and are neither for customers nor for the insurance industry itself the most appealing way to go. Side note: This might change now with the experience from the COVID-19 pandemic situation and the resulting mobility behavior changes, as more and more people question why they should pay for car insurance if they don’t drive.
If we consider telematics usage for dynamic pricing only, this might partially justify some bias in insurance telematics’ perception. But that’s only the tip of the iceberg when it comes to all the benefits the connected insurance concept based on mobility data can put forward.
Jane wants to sign up for car insurance. She visits the insurance tariff calculator or a tariff comparison engine, fills out endless forms, and in the end gets an offer with a far too expensive premium – and visits the website of some competitors. It does not need to be like this. With today’s advances in AI and bots for customer support, the whole process could be simplified to just a few clicks. For sure, that does not eliminate the tariffs’ problem. Imagine now that Jane Doe would be offered, before process abandonment, a much better premium if she proves that she is a safe driver during an initial period of maybe 300 km. Just by downloading a mobile app. Who would not take the opportunity to receive a much better offer, with no drawbacks?
When is John usually in contact with his insurance? Usually, only then when he receives his car insurance invoice, or if he needs to file a claim. We all agree that these are not the best moments in life and putting a customer relationship at risk. Customer retention is a crucial point, and constant and positive communication can improve it. With mobility data at hand, additional features on top can be easily created: trip logbooks, for example, allow your customers to keep track of all trips they did in the past and how good they have been driving in terms of risk, eco-efficiency, and car wear. Provide your customers with a level of transparency that differentiates you from your competitors. Being able to collect benefits along the whole contract lifetime thanks to your mobility data increases customer loyalty. We all have a little child inside us, so gamification and incentives are still a fantastic way to design an attractive insurance product.
Jane is a mother of three, owns a dog, and is regularly making vacation trips as she is passionate about skiing. How do we know it? Through situational analytics taking into account daily mobility patterns, e.g., daily trips to school, to kindergarten, to the dog park, and some outliers, as such the trip to the ski resort. With this data at hand, Jane Doe could receive personalized and suitable offers for children’s accident insurance, pet health insurance, or travel insurance. Telematics data and mobility profiling can significantly boost upsell and cross-sell of traditional or smart insurance products.
If John opts into telematics-powered insurance and receives benefits for his responsible driving, the magic of positive risk selection happens: he will most probably automatically drive safer. Creating a transparent feedback channel for John Doe with simple to understand yet deep insights into his driving behavior, and enabling coaching, will make him become an even better driver eventually.
To conclude: insurance telematics does not automatically implicate an integration of driving data into pricing models or creating a UBI, but helps insurers to strategically improve their market position by building up their own data lake, enhancing customer communication, and differentiating from their competition with a client-centric, data-powered approach.
Key takeaway: Don’t judge too early on the tip of the iceberg, otherwise, you could end up like the Titanic.
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