Investment into telematics is quite critical and the insurance industry knows it. Over the years, the use of telematics has slowly but steadily been growing, as insurers have understood the value it provides, and how it has transformed the underwriting, and claims functionalities. Telematics provides a step change improvement when it comes to risk assessment, essentially because it relies heavily on data captured from various sources. When done correctly, insurers can create a score that provides a significant lift that goes way beyond the traditional factors and even be able to identify favors that cause accidents or failures in a vehicle.
Insight into telematics
Of all the industries, the insurance industry has reigned in the top position when it came to working with data. Nearly every function within the business relies on trends, and data. This is what helps them take decisions, figure out pricing, product offerings, risk profile, marketing campaigns, underwriting, and goes all the way to claim settlement. Telematics, though is relatively new, offers this insurance industry another avenue for data gathering and usage. Most of the large players in the auto insurance sector have adopted telematics, and implemented programs using GPS enabled mobile/web apps to understand their customers better and offer higher levels of service.
These programs are customer centric, and showcase how different types of data can be collated to provide deeper insights for the insurance company. The customer and insurer tend to benefit from these programs, which is the advantage of telematics.
All about the data..
Traditionally, the insurers were relying on proxy data when it came to assessing risk profiles and risk loss for any asset. However, the Internet of Things [IoT] has given insurers the opportunity to leverage on real time data to mitigate risk. They can provide timely feedback to their customers thereby giving them a heads-up when something is about to go wrong and rewarding them for good/safe driving/behaviour. OEM-enabled telematics is another system that provides richer data and makes it easier for the insurer to decipher the data captured. Infact, there is little need to re-engineer or interpret the data gathered from any of the traditional third-party On Board Diagnostic [OBD] devices.
Here is an overview of the countries across the globe and the Telematics penetration…
A study conducted in 2019 by C.J. Driscoll & Associates has revealed that the telematics market in North America has grown from $2 billion to nearly $5.3 billion, and is estimated to keep growing.
Similarly, telematics also extends to the health insurance sector. Only difference is, in case of health, insurers rely on data from connected wearables- smart watches, smart gear, fitness trackers and other such devices [Fitbit, Garmin to name a few]. Insurance leaders can gather data through these devices to study and analyze their customer behaviour and lifestyle.
Health related data points are all tracked constantly and when combined with other health factors, it provides insights that were earlier inaccessible to the insurer. Distance travelled, calories burnt, elevation gains, active workout duration and other pre-existing health conditions are all taken into consideration. On the basis of reports generated by the system, insurers can offer discounts, flexible premiums and personalized products to their customers.
The customers on the other hand begi to understand their own lives better and are more cautious or aware of their actions and the implications of the same. However, telematics is not without its downsides. If the user fails to charge their device, or if there was an error in the unit, then the data captured will not be accurate. There is also the concern about privacy of data. It is therefore upto the insurers to tread lightly but to help the customer understand the end objective and benefits of the same. Here is a chart of the percentage of people who were actually willing to have their data be captured and tracked…
Source: https://www2.deloitte.com/us/en/insights/industry/insurance/telematics-in-auto-insurance.html
With an eye constantly looking into the future, apart from receiving data from several data points, insurance companies might be able to push data to the driver via the inbuilt infotainment system and offer direct action suggestions that are related to safety or vehicle efficiency.
The shift in the market, the shift in focus from product to customer, the importance of the ecosystems does provide ample opportunities for some of the players to realign their business initiatives and priorities and gain an edge over others in the process.
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