Using telematics data to boost the value proposition
IoT can drive fundamental change in the car insurance industry, bringing insurers closer to customers on an individual level and empowering better decision-making through insights. In particular, the following key opportunities are arising for car insurance providers from the use of advanced car telematics:
Innovating to delight users
The growing usage of IoT opens a new opportunity for insurance providers to innovate their offerings and reduce the premium and risk-related costs. Creating accurate risk profiles based on driver behavior, usage of driver assistance systems and the context of driving, is a gateway to competitive products that delight customers and compel them to stay.
For example, insurers can use actionable, telematics-based insights from analytics to provide individual driver discounts matching their profile or build a unique rewards program. In addition, by enabling smart pricing, data-based solutions further help insurers maximize profit margins and design profitable pricing strategies that unlock bigger sales. Telematics also opens the door for usage-based, or pay-as-you-drive insurance, where the cost of insurance changes dynamically depending on the usage, vehicle, and driving behavior.
Reducing the cost of claims
Lowering claims payment is essential for high underwriting income. Unfortunately, a quick look at research data confirms that rising claims frequencies and persisting severity increases continue to eat into insurers’ profits. In the first half of 2021, 70% of the largest US private auto insurers saw their loss ratio deteriorate by double-digit percentage points. Telematics usage-based insurance solutions can be instrumental in reversing this negative trend by accelerating the claims process and thus reducing claims costs.
Adopting a telematics-powered solution can give insurers instant notification of a claim’s incident, shortening the time between the first notification of loss and the claim resolution. But facilitating incident assessment isn’t the only gain that helps reduce the loss ratio. Cutting-edge predictive analytics solutions also help predict and prevent many incidents, leading to lower auto claims’ number and severity.
Closer alignment with customer expectations
Data analytics uncovers valuable insights into customer behavior that insurers can use to better align their offering with consumer wants and needs. And diversify away from traditional premium discounts, offering a range of value-added products and services instead. For example, non-insurance rewards serving as an extension of core insurance products are an extremely effective way to maintain customer loyalty. By tapping into the power of data with predictive analytics solutions, insurance companies can discover what kind of reward specific customers will appreciate most, whether it’s roadside assistance, fast claim management, or restaurant coupons, and meet these expectations.
Besides, policyholders also benefit from digital insurance powered by data collection by minimizing the latency between an incident and the claim’s settlement. The insurer’s speedy and efficient resolution of cases translates to their satisfaction, which, in turn, positively impacts retention and loyalty. Additionally, by tapping into the power of data, insurers gain the knowledge essential to enhance their products and services in line with the dynamically shifting expectations of modern consumers.
Finally, connected insurance marks the era of true insurance personalization, where powerful data analytics underpins solutions to tailor each offering to a particular person instead of a broad customer segment. By exploiting data collected from mobile apps and in-car devices, insurers can evolve their products according to individual customers’ expectations and build more focused marketing campaigns to reach more leads, convert them more efficiently, and keep longer as happy customers.
