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Inflation busting telematics informed car insurance

It’s about the loss ratio, and the economics.  And the company culture, and the policyholder focus.  So how can telematics car insurance help beat inflation?

The numbers (illustrative):

A decade ago, the modus operandi of our energy and insurance sectors was straightforward yet arguably lacked efficiency. Traditional electricity meters were read manually with several months between each reading, with bills approximated based on these sparse data points. Simultaneously, auto insurance premiums were determined annually, a practice that largely neglected the fluctuating nature of risk factors.

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Key equation:

Telematics costs must be equal to or lower than the reduction in losses incurred.  The areas where telematics can generate strong ROI are:

  • Risk management – understand and act on ways to improve the driving behaviours of your policyholders to reduce their chances of having an accident
  • Claims fraud – understand forensic detail of events around a claim to weed out fact from fiction
  • Claims process – benefit from efficiencies in digital data and speed of resolution
  • Claims liability – understand forensic detail of events around a claim to inform liability and court proceedings
  • Customer retention – loyalty prompted by value and fairness; reduces cost (discount, marketing) of keeping that policyholder

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Is that a business case approach?

So that is a business case approach, yes ?  The loss prevention benefit must exceed the cost of the technology deployment.  Three elements to moving forward: minimise costs, maximise benefits, evangelise this solution!  Let’s explore.

Minimise costs

Much has been written and said on app-based approaches.  The pros are evident – ease of sign up, adoption and usage, immediate generation and use of data.  The cost very much lower than costs involving an additional piece of kit, a telematics device or tag.  The cons are on the limitation on the very best claims data.  In addition, there is a necessary strategic view on IT investment.

Maximise benefits

An impactful driver coaching programme based on app-generated ‘scoring data’ is a considerable undertaking both in terms of skillsets and money.  The benefits are as yet unproven although the rate of adoption (particularly in the US) suggests some belief.  Claims management and resolution is more clearly appraised in the efficiencies realised through digital solutions, and the robust granular data powerful in court.

Lastly, more engagement with App-based tech has reduced customer service costs (more self-service) for insurers also. 

Evangelise

The US leads.

Survey says of those offered telematics, 60% opted in.  Frequent inexpensive rewards have proved popular.  Along with accident assistance and anti-theft support. However, penetration is still low, at 5%.  In South Africa Discovery Insurance saw a 15% improvement in driving behaviours within 30 days of joining.  Surely positives and opportunities? Can the UK, Europe and APAC catch up, and offer fairer, better insurance for ever broader markets?

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