A win-win for insurers and customers ...
Telematics have been around in insurance for a long time and, although there have been some notable successes, there is still significant value to unlock.
Certainly, in the UK market, telematics propositions are focused on younger drivers who are essentially forced into the product to lower insurance premiums.
Customers haven’t really bought into the concept, there are concerns around privacy and feeling uncomfortable that Big Brother is watching.
Many telematics solutions are measuring the wrong metrics: acceleration, braking and cornering don’t give an accurate picture of driving behaviour and safety.
Insurers are struggling to define a compelling customer proposition, are uncertain around the accuracy of the data and many remain undecided between the large number of possible solutions.
However, there are some interesting developments set to shake up the telematics market:
- New technology is allowing a greater understanding of driving behaviour and, harnessed correctly, can improve safety
- GDPR will change the customer relationship, giving them control over their data, and how and with whom they share it
- New entrants are poised to launch business models that will challenge the status quo
The main reason for the increase in road accidents and road deaths is distracted driving, caused by use of mobile phones. Raising awareness is critical and new app-only telematics solutions will play an important role.
Technology now allows firms to create a comprehensive driver fingerprint and then monitor variations against that normal driving pattern to identify and alert the driver to signs of fatigue, driving under the influence and distracted driving.
Next-generation telematics will leverage these advances to create safer driving behaviour and extend into supporting accident and injury assessment, provide real-time notifications, highlight accident hot spots, monitor vehicle wear and tear and assess surface and braking conditions.
In this situation, the value proposition for customers, now focused on improved safety, is much more compelling and we expect this to drive increased adoption across all age groups.
In addition, GDPR, which goes live in May 2018, will create additional challenges for existing models. Consumers will have the right to stop sharing data and to request insurers to provide their data in a usable format to other organisations. The file sizes would be huge – will existing systems be able to accommodate these requests?
There are solutions being developed that are GDPR-compliant and put the customer, rather than the insurer, at the heart of the product.
We believe that these latest telematics propositions, harnessed correctly, can drive significant benefits compared to current motor products, and that insurers embracing these new models will be able to create a differentiated proposition in a crowded market place.
Consumers will benefit from reduced premiums, safer driving behaviour, more flexible products, control of their data and comfort that their privacy is not being compromised.
Insurers will be able to tailor premiums to reflect driving behaviour, select better quality risks prior to underwriting, prioritise retention of good risks and cancel bad risks before a claim, reduce fraud, improve claims management and enhance customer relationships to improve retention.
A win-win for consumers and insurers …