Is it possible to predict — with any accuracy — the insurance landscape of the future?
Our world has been rocked; there’s no denying that. And whenever the world rocks, we experience tremendous shifts in the way people think, travel, shop, work, and behave.
This makes using only traditional data to predict how any industry is going to evolve much more difficult. But it’s a whole lot easier when you have near real-time data, too.
Arity’s own Gina Minick, Director of Product for Insurance and 10-year veteran in the telematics industry, talks in this presentation about how we can more accurately predict the automotive insurance landscape of the future by analyzing the data of the very recent past. The presentation was featured at the Reuters Future of Insurance virtual event. Read on to learn Minick’s insights about what’s happening in telematics, why, and what we can expect next.
The Current Landscape
More and more auto insurance companies are using telematics data to change the way they think about customer interactions and to advance the evolution of auto insurance products. In fact, all of the top 10 insurance companies now leverage some type of telematics program.
But the total number of insurance policies that use telematics programs still only adds up to single digits: 6%. This leaves so much opportunity on the table.
Before going into what these opportunities are, it’s always good to have a refresher on how far we’ve come in the last 10 years.
A Short History on How Much Telematics Has Evolved
We’ve had more than a decade to test and experiment with driving and vehicle data to realize the potential of telematics. Here’s a quick snapshot of some key milestones:
- 2008: OBD II device data was gathered from vehicles.
- 2010: Driving scores were developed, and rewards were given for lower driving risk behaviors.
- 2014: Mobile data capture began to occur, including device data for models and from multiple different app types.
- 2015: The insurance industry began to move away from discount-only programs.
- 2018: Behavior models add distracted driving to the telematics data set.
- 2020: Telematics behaviors are leveraged in targeted marketing; insurance companies are able to connect with a consumer using predictive analytics to anticipate or measure shopping intent or lifetime value, just from their driving data.
That brings us today and we at Arity predict that automotive insurance companies will be able to significantly move the needle on the percentage of policyholders enrolled into a telematics program by approaching them in a completely new way. Instead of relying on the consumer to discover and enroll in their auto insurance company’s program, insurance companies will connect with them where they already are.
An intriguing approach, no? Read on; we’ll explain.
What Are the Latest Big Shifts that Will Impact Telematics?
How will telematics drive more value for insurance companies and their customers in the future? Data and research are showing us these five big changes:
- Exposure increased: With COVID-19 and the stay-at-home guidelines, exposure to telematics programs increased. Insurance companies needed to know how much people were driving, and it was wildly different for different groups and individuals. Type of job, where they lived, and other factors contributed to where, when, how, and how often people drove.
- Consumers’ perceptions shifted: People are simply much more likely to share data today compared to a year or two ago. In 2019, only 30% were comfortable sharing driving data. In 2020, this jumped to 50%. This may be due to a growing awareness of the benefits of enabling these permissions.
- Shopping behaviors changed: Today, people are much more likely to change their policy, such as decreasing coverage or shopping around to find a better premium for their situation. In the last year, 46% of people have made changes to their auto insurance.
- Competition responded: Over the last year or more, the “business as usual” mindset became unacceptable. Insurance companies began offering deeper discounts and spending more marketing dollars on raising awareness of telematics programs.
- The whole industry is more challenged: Regulatory changes are coming; for example, you can no longer use credit to assess risk (and set premiums) in the state of Washington. And in Colorado, there are draft bills that will limit the use of 3rd party data in order to protect consumers from unfair discrimination.
Telematics Data Increases Accuracy on Predicting Driving Risk
Insurance companies have spent years trying to perfect predictive models, but it’s a losing battle, especially with all the rapid behavior and industry changes. By using only telematics data, however, we can now predict driving risk with 75% accuracy. Add some details, like type of vehicle, and we get to 90% accuracy. Add some of the traditional methods and you have a seriously big step forward in perfecting those models.
The auto insurance industry has an opportunity to connect with consumers across the entire consumer lifecycle, and yet most companies are still only using a driving score — and only after several months of collecting data — to change the price of the premium.
So that brings us to the intriguing concept we hinted at earlier: reaching a tipping point in telematics by connecting with consumers where they already are. How do we accomplish that?
The Future of Telematics: Partnerships
The future of telematics is not only about connecting with a consumer and getting them to enroll in an insurance telematics program, which is a huge endeavor. It’s about partnerships.
The data already exists. The problem has always been that competing companies don’t want to share that data. But partnerships with non-competing data aggregators, especially ones that are collecting mobile app and OEM data from millions of connections, removes this obstacle.
Consider this: mobile apps already collect much of the data we need to develop a driving score at the time of the quote. At Arity, we’ve already experienced positive traction for mobile apps to add value beyond the driving score.
Within an app the consumer already uses and trusts, the individual can opt in to get insurance offers, value-add services, and other targeted marketing based on their individual behaviors and interests. For example, through a 3rd party mobile app, auto insurance companies can offer services like driver coaching and collision detection. They can also settle claims faster and more quickly understand whether a total loss has occurred based on high speed and high impact data.
Auto insurance companies can learn about driving behaviors even before the consumer starts shopping. The sooner we have data, the better we can inform a consumer of the best products for them. Mobile apps are providing the volume of supply that has been missing for so long.
With only 6% of Americans are enrolled in an insurance telematics program, it’s high time to reach that other 94%. We don’t have to only rely on traditional characteristics or siloed insurance-brand-specific data gathering methods. Meeting consumers where they are to understand their needs today is the future. More partnerships means more continuous connections and better consumer experiences. This is the moment we have all been waiting for — and not just the auto insurance industry. Mobile telematics is primed to support many industries. But we’ll save that for another post.
Interested in leveraging mobile app partnerships for your telematics programs? Arity can help.
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