Insurance Carriers Can Expand Tools Beyond Usage-Based Insurance With Telematics

Data collection and management has traditionally been one of auto insurance industry’s greatest assets. The auto insurance industry is presented with a historic transformational challenge, owing to the increasing sophistication of in-vehicle electronics and the ubiquity of wireless connectivity.

With the incorporation of new digital technologies in cars, it has opened doors for the development of effective electronic management and operation control sophisticated systems. In addition, emergence of satellite-based navigation technology and global positioning system has paved way for the rapid development and successful implementation of telematics system. Through the integration of these new systems, vehicle telematics can now provide detailed driving behavior data, with precise time and location, and communicate it to a remote central location.

The surge of telematics-supported usage-based insurance (UBI) has ushered a new era in the field of automobile insurance. Automobile telematics, integrated navigation, and computer and mobile communication technology directly monitor driving behaviour of the consumers. It allows insurers to use true risk factors to accurately assess risks and develop adequate UBI rating plans.

Consumers’ growing interest for in-car connectivity has contributed to the appeal of insurers’ telematics-based programs. The data recorded in telematics devices can be used to develop precise rates, develop the granularity of risk management techniques and minimise losses by providing better claims assessments.

With the rapid advancement in technology, insurers’ telematics programs are expanding past premium discounts. They now include other value-added services according priority to competitiveness and consumer loyalty.

There is a commonly perceived notion that telematics means usage-based insurance. But, telematics has expanded much more. Now, insurance carriers are looking to telematics in loss control, claims adjusting, fleet management, and more as they strive to gain a competitive edge.

This apart, carriers are choosing telematics in servicing and automotive book management. More insurance carriers, today, are piloting additional services based on telematics. These services also include roadside support and trip support, evaluating your position and needs, and other concierge-type services. This is a pan shift from traditional insurance, which tries to differentiate and appreciate “safe” drivers.

The key drivers for the growth of telematics-based UBI are the plentiful benefits to both consumers and insurers. For consumers, among the benefits are enhanced safety, improved claims experience and possible lower premiums, While for insurers, the main benefits are better risk pricing, mitigating adverse selection, reducing claim costs, improving brand recognition and loyalty and modifying risky behaviour. To assist in the development of a competitive marketplace for insurance carriers, telematics system ultimately delivers on the promise to be a valuable tool not only to insurers but also to consumers and society as a whole.

With the backing up of an effective telematics system, insurers are investing on their ability to gather, store, and analyze variable data to solve complex problems in order to remain a viable and profitable business. Auto insurance is fast becoming a big data industry, with telematics-based UBI poised to potentially change the business of insurance as we know it.

Today’s cars can park themselves, help avoid traffic, and also find the nearest gas station when the tank is low. Behind these new fuel cells and connected cars lies the next biggest disruptor in the automotive industry. In the very near future it will be the norm for cars to be autonomous.

For insurers, however, these innovations are altering the traditional landscape of auto insurance, while posing real challenges that need insurers to rethink their policies, claims processing, and their overall business models. Insurers who grow with the evolving automotive industry are the ones who can secure their place. A dynamic insurance carrier must understand new forms of data that will prove to be operational as ground-breaking technology and social norms emerge.

The introduction of telematics has already made significant changes in the industry. As the consumer becomes more accepting of technology, it is likely that the number of policyholders willing to embrace telematics will also increase dramatically.

The basic idea of telematics is to analyse risk on an individual level. Adding to the more traditional factors such as age, gender and experience, actual mileage driven has also been added. Now telematics comes with a promise to add more accurate factors by calculating actual driving behavior by analysing hard breaking or swerving. Ultimately, an insurer can measure how a car is driving along with the situation, such as time of day and weather and traffic conditions.