Four ways the insurance industry can use telematics to improve customer engagement
Leverage Connectivity to Power the Future of Auto Insurance
Over the past decade, the auto insurance industry has used telematics primarily to determine consumer pricing. But now, telematics – combined with customers’ continuous connection to their smartphones – offers an intriguing new business model for insurance companies.
This phenomenon, the acceptance and widespread constant use of connected devices, is truly a momentous occasion in time. It’s one of those game-changers that we will look back on as a significant turning point for not only the insurance industry but also the transportation industry as a whole.
Two Wharton Business School professors have spotted the opportunity as well. In a Harvard Business Review article, they explore the impact of continuous connection not just for insurance, but across industries.
In the article, they outline four industry-agnostic strategies that companies can use to deliver new products and continuously provide added value to customers:
- Curated Offers: Deliver relevant, personalized information by smartphone
- Automatic Execution: Meet the needs of your customers before they ask
- Respond to Desire: Provide customers with services they’ve requested as quickly and seamlessly as possible
- Coach Behaviors: Motivate customers to achieve their goals through timely nudges
Applied to the insurance industry, these four digital interactions allow you to move beyond the transactional and reactive relationship you may currently have with customers, such as policy renewals and claims processing. In addition, they can create engaging, positive experiences with new and existing customers.
Let’s take a closer look at those four strategies that show how continuous connection is already beginning to develop a new business model in the insurance industry and beyond.
1. Curated Offers
Think of how Netflix™ or other streaming services get you to click on content offerings. They look at what you watch, what you click on, and what you scroll past. They’ve built an algorithm based on consumer data to give you what you need or are most likely to respond to.
The insurance industry is doing something similar. Instead of waiting for customers to go to insurance websites to get a quote, companies are taking advantage of driving apps, such as Life360™ and AT&T DriveMode™, that consumers use every day, as well as advertising platforms, such as Arity Marketplace ™.
Marketplace uses mobility data to continuously connect publishers and brands with their audiences based on their behavior and context and allows insurers to target the right drivers and improve their customer lifetime value.
Embedded software in these apps can serve up insurance offers based on the data the app collects, such as mileage or driving habits. This personalizes the quote and simplifies the process, which saves the consumer time.
2. Automatic Execution
Automatic execution helps the customer in time of need, which creates a more positive interaction between the customer and insurance carrier. This shifts a traditionally transactional relationship to one that much more customer-centric.
Appliance companies are using the “automatic execution” strategy to help customers with their daily living. For example, LG and Samsung make refrigerators with apps that help you keep track of expired or about-to-expire products. These can be automatically added to your shopping list.
Automatic execution is also a feature of the Apple Watch®, which can detect if you take a hard fall. If you don’t tap the watch to indicate you’re OK, it will automatically contact 911.
The insurance industry can take advantage of this strategy, too. By leveraging algorithms, GPS, and sensors within the smartphone that measure rapid and extreme accelerations, insurance apps or other mobile apps can detect when someone appears to get in a car crash.
Based on your customer’s app preferences, this scenario can set off a chain of events, in which you, the insurance company, alert first responders, and even directly contact the customer to offer assistance.
In addition to processing a claim after the crash, insurance companies can be proactive and, like the Apple Watch, help save a customer’s life.
3. Respond to Desire
The “respond to desire” strategy puts you in a position where it can respond to the consumer’s needs quickly and efficiently, precisely when the consumer wants it most.
Amazon™ is the master of responding to customer needs. Take 1-Click™ ordering, which makes it fast and easy for customers to purchase products.
Amazon has all the relevant customer data — shipping preferences, delivery address, and payment method – needed to process the order. So when the customer sees a product they want, they make one click and the product arrives at their door the next day.
This strategy can be applied to the insurance industry as well via claims processing and pricing and products processes. For example, with a close connection and response, the insurance carrier would have the ability to gather more data on what happened during the accident.
When a customer files a claim, the insurer would already have the information they need and be able to reduce their claim cycle time. Poor claims processing can result in customers switching insurers. If you can respond in real-time and reduce the claim cycle time, you have a better chance of retaining the customer.
Telematics data can provide contextual information around car accidents. This is critical for two reasons.
First, it can help reconstruct what actually happened, which is helpful for customers reporting a claim. Accidents are highly emotional situations, and customers often have trouble recalling the details. Many drivers in crashes that are so severe that the airbag deploys don’t remember that it did.
Second, telematics helps insurance companies understand how much of the claims process can be predicted and prevented. In fact, you can predict with 97% accuracy that a customer will hit a deer or have a rear-end collision.
So how does this translate to a response to desire? Simple. When a customer gets in a car crash and initiates a claim, the insurance company can kick off a more efficient claims management process. It can ensure the right adjuster is assigned to the claim and provide the appropriate level of service.
For the customer, this means having to answer fewer questions about the accident. And if it’s a total loss, you can respond more quickly by getting help for the customer at the scene.
Ultimately, telematics – combined with a continuous connection to customers – allows you to improve efficiencies around the insurance claims process and reduce costs, while also offering faster service to the customer.
Pricing and Products
Both OEMs and consumer apps gather data on when, where, and how someone is driving. You can now leverage that data as your customers shop for insurance.
For example, a low-mileage driver who lives in a city might be offered a pay-per-mile program. Another driver with a good or safe driving record would be offered a different product.
From the beginning, each customer is quoted the right coverage and the right product. This avoids a complicated product experience for the customer and makes the purchase frictionless.
4. Coach Behavior
Coaching the desired behavior can benefit both the organization and the consumer.
The fitness industry does a great job of nudging people to complete their goals. Like the Nike®+ Run Club app, which sends notifications to runners to put in some miles that day and encourage them mid-run.
The insurance industry can also use tech nudges to their advantage, especially when it comes to distracted driving.
Distracted driving creates an enormous risk. In fact, 25% to 30% of total insurance losses are due to some form of distraction. Even worse, research shows that distracted driving accounts for nine deaths a day in the U.S.
And it appears that many drivers aren’t aware that they’re part of the problem. An Arity annual survey on distracted driving revealed that 98% of respondents believe that other drivers are distracted, yet only 42% admit to being distracted themselves.
Mobile apps, however, can nudge drivers to make them aware of their behavior and change their habits. Look at braking behavior. When drivers engage with their phones, hard braking increases 70%, and it takes 7 seconds for the driver to return to normal braking behavior.
Apps can nudge drivers to make them aware of their behavior, encourage accountability, and either change or reduce that behavior, for example, by providing a daily driving summary and score at the end of the day.
Overall awareness can help make the driver safer and smarter on the road. It can also minimize insurance losses that result from hard braking, hard cornering, or speeding. These behavior changes directly lead to safer drivers on the road, fewer claims, and fewer payouts.
What’s Next for Insurance Companies?
Too often, customers associate insurance companies with a negative experience. Their annual rates go up. They’re paying more to add a new driver to a policy. They’re navigating the claims process after an accident.
You, however, can change that. These four strategies can solve real business problems within the insurance industry.
They also can help you understand and better serve your customer. They can foster positive customer interactions, minimize risk, improve services and products – and even save lives.
The insurance industry no longer has to be simply transactional with customers or reactive to events. A continuous connection and access to data can be the catalyst to an exciting new or revamped business model.