Benefits of Telematics: Using Telematics Insurance to Better Engage with Customers and Streamlining Their Experience
Insurance telematics encompasses a broad range of services and programs, relying on the availability of captured data from vehicle operation and individual drivers to develop programs that better respond to the needs of policyholders. Telematics data delivers more precise insights into each customer’s habits, driving behaviors, personal preferences, and travel patterns. This makes it possible to communicate and engage more deeply with policyholders to establish long-term relationships, offer value-added services, and respond more effectively to individual requirements.
The disruptive forces reshaping the insurance sector as digital transformation gains traction represents a tremendous opportunity for insurers to revamp current business models to take advantage of new technologies that inform, enlighten, and encourage practices that lead to safer driving, fewer accidents, and reduced claims. Insurance telematics brings greater transparency and deeper insight into the many different factors that impact the operation, safety, and reliability of automotive travel. In the end insurers that continue to enhance and scale established telematics programs the right way will be well-positioned to increase market share as weaker players are sifted out.
What are the Benefits of Adopting Telematics?
Many of the primary advantages of telematics can be achieved with capabilities available now and in the short term, with the complete potential of the technology, predictive analytics, and extended program possibilities continuing to increase over the coming years as companies recognize the opportunities and integrate telematics programs into existing business models.
As telematics programs grow in functionality, scope, and sophistication—with different solutions and integration with connected-car technologies increasing throughout the industry—insurers that adopt and scale telematics programs will be well positioned to take advantage of evolutionary changes that are sure to take place in the industry. The steady growth of insurance telematics and UBI and its increasing market expansion suggest that the long-term benefits have become apparent to many insurers, and those that develop programs around the opportunities will have a competitive advantage in the future.
Because data is such an important resource for the insurance industry, in their Weekly Credit Outlook, Moody’s stated, “Adopting UBI sooner rather than later will not only attract better drivers willing to participate, but will also allow carriers to build and maintain a database on numerous variables that influence loss costs.” The article continued by emphasizing that obtaining sufficient vehicle operation data through telematics allows insurers to “incorporate variables into their pricing models that are more correlated with loss cost, leading to significantly enhanced predictive modeling capabilities.”
The business benefits of telematics-based insurance include:
- Attracting low-risk drivers.
- Lowering the cost of claims and responding more promptly and efficiently to
- Attracting lower-risk drivers who appreciate being rewarded for their safe
- Increasing the number of potential touch points each year and providing additional
- Strengthening customer loyalty through enhanced communication and personalized
- Creating a platform upon which attractive new services and innovative program
offerings can be launched.
- Encouraging smarter, safer driving behaviors through feedback, coaching,
What are the Benefits of Telematics Programs and Why is it Good for Drivers?
Insurers can successfully enhance driver behavior, as has been indicated by a number of surveys, by providing prompt feedback, rewarding safe practices, acknowledging improvements, and, in some cases, creating games to let a driver immediately see recommended practices in action with scores that help reinforce good driving.
Providing ways to encourage more frequent customer engagement is a basic characteristic of telematics insurance and a proven means for strengthening long-term customer relations.
Usage-based Insurance (UBI) programs were one of the first implementations of an insurance telematics service, emphasizing measurement and analysis of risk factors for establishing prices based on real-world data as a complement to traditional rating methods. Successful UBI programs have sprung up across the industry and have helped further the acceptance of telematics, as well as provide a proven foundation for developing and launching additional services that leverage data collection and analytics to deliver greater value to customers.
More efficient claims handling is another important business benefit of telematics, including:
- Immediate notification of accidents.
- Data-based assessments to detect fault and fraud.
- Rapid claims settlement and accurate First Notice of Loss (FNOL).
- Accelerated claims management to lower costs.
To address two of the primary challenges of automotive insurance—lowering the frequency and magnitude of claims—telematics offers significant business value to insurers. Among the key benefits:
- Driver coaching and feedback. Providing real-time coaching and feedback through a smartphone app or vehicle console can improve driving behavior and minimize losses.
- Distracted driving detection. Distracted driving is a major cause of accidents that accounts for as much as 50 percent of crashes. Digital tools can detect and monitor distracted behaviors, coach and deter certain activities (such as cell-phone use while driving), and produce scoring that can impact a driver’s premiums.
- Safety scoring. To encourage safer driving (resulting in fewer incidents), safety scoring can be applied using a number of factors based on captured vehicle data, such as acceleration, braking, and cornering data; distance; time of day and day of the week; and more.
- Accident detection. Data collection within the vehicle can provide detailed accident reconstructions and minimize the number of fraudulent claims.
- Incident detection. Detection of incidents and quick communication with insurers via automated, data-driven FNOL can be a money saver, reducing fraud, facilitating replacement vehicles, and summoning tow services quickly to an accident scene.
Ultimately the insurance industry is deeply dependent on data, telematics provides a comprehensive set of tools and technologies that can be used strategically to help insurance carriers improve their position in the market. When developing a telematics program, specific strategies can increase the odds for success, including careful planning and testing, the use of value-added services, the manner in which customer relations are handled, the pricing model, and effective use of data analytics within the program.