Auto insurers – whether focused on the consumer market or fleets – are entering a period of rapid transformation and disruption. One of the technologies driving change for insurers is telematics. Telematics is the unification of information and communication in devices, including our smart phones, that transmit information about how a vehicle is being used and even what is happening in the environment around the vehicle.
While auto insurers have been reluctant about using telematics to learn more about the driver’s they are insuring this is beginning to change. Greg Donaldson, Senior Analyst at Aite Group shares three reasons that auto insurers should take a closer look at telematics.
- Telematics will improve the bottom line
Insurers operate on hyper thin margins and so anything that can improve the accuracy of policies and underwriting is a valuable tool. “Telematics enables auto insurers to move from policies based on static information to ones based on dynamic information,” said Donaldson. Instead of writing policies based on gender or age, the additional data generated about a policy holder’s actual driving patterns or temperament to build a policy that more accurately reflects the risk profile of each driver.
- Telematics will cut down on fraud
Fraud is an everyday reality in the insurance industry, but telematics will help auto insurers mitigate loss. One of the most interesting applications is to address medical fraud. In-vehicle devices can easily report on the force of impact, which, in turn, can verify or refute a medical injury claim. Moreover, Donaldson shared, devices can also log data about weather conditions, aggressive driving, breaking force, and other information that’s key to understanding an accident, assigning responsibility, and mitigating future risk exposure.
- Telematics will improve customer relationships
Who among us likes interacting with our insurance company? Neither policy renewals or managing a claims process brings much joy, but telematics will help insurers change that dynamic according to Donaldson. “While this might still be a hard sell to a high-risk driver, it still opens up the possibility for the insurer to become an advisor about how to improve, or which safety features should be used to improve their risk profile,” he said. But the real consumer-focused benefits become clear in the immediate aftermath of an accident. “Because of telematics an insurer can be informed of an accident in near-real time,” Donaldson noted. “Instead of you calling your insurer, your insurer could call you immediately to assess what you need, dispatch a tow-truck immediately, call your emergency contact, gather visual proof from the scene, and the claim open and underway before you’ve left the accident site.”
But these three reasons are just the beginning of the benefits that telematics will bring to auto insurers. And this is just the beginning of the conversation about the data-driven future of the insurance industry. We’re definitely looking forward to a quickening pace of innovation and what comes next.
