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Wait a minute… what is telematics?
Telematics devices come in many forms in different industries, but the most common application for these devices is portable or embedded trackers placed in customers’ vehicles to measure driver behavior. These devices have matched automakers and insurers who recognize the value of the data collected. Usage-based insurance programs allow insurers to consider the details of individual driving behavior, so insurance ratings may be about individual habits rather than the “popular”. In theory, this one-to-one approach to underwriting is good for insurers that assess risk based on individuals and their surroundings rather than averages. It could end up leading to a lower price (or at least a price that fits your lifestyle).
Entering the golden age of pay-as-you-go insurance?
With claims frequency and mileage exceeding pre-pandemic levels and premiums increasing at double-digit rates in many states, insurers are quickly turning to UBI or “pay-as-you-go” plans. You may be in a great position to attract new customers. In fact, Nationwide says more than 70% of his new business will come from usage-based insurance programs by 2025, especially as cost-conscious shoppers find few low-cost alternatives in the market. I am predicting. Given the universal interest in cutting non-essential spending, sentiment on UBI could hit an all-time high.
Tracking driving habits such as braking, acceleration and mileage will give insurers a more accurate assessment of risk and more control over who should be underwritten as policyholders. On the consumer side, drivers can now also examine their own data. These personal statistics may overlap with the data the insurer saw when they first set their rates. This not only provides insight into how consumer behavior affects prices, but also encourages safer driving.
A recent development of UBI for the automotive industry is the move from external devices to smartphone apps. Given that 85% of Americans own a smartphone, this advancement is inevitable and has been widely embraced by consumers who value the convenience of using the devices they already own. Smartphone telematics gives insurers the same data as external devices while reducing overhead costs. Providers don’t have to pay for expensive hardware. It also eliminates the need for the insurer to partner with the manufacturer to receive underwriting data, allowing him to provide his UBI regardless of vehicle make and model.
Could other industries see increased use of telematics?
Telematics could emerge in the areas of health insurance and life insurance. The “pay as you live” model holds promise for both insurers and policyholders alike, and the technology to make it a reality is already available.
PAYL is basically a healthcare variant of the “pay-as-you-go” mentioned above. In this example, an insurance company can provide policyholders with an external device or sensor that collects data such as heart rate, blood pressure, and exercise count. number of steps per day. Customers may frown on sharing this kind of data, but we’re already seeing a major insurance company launching his Apple Watch program. This suggests that at least some policyholders are interested in sharing their health habits if they see value in return. .
Taking Aetna as an example, in 2019 we launched the “Attain by Aetna” program. The program encourages customers to meet personalized daily and weekly activity goals and participate in fitness challenges. In this model, the customer requests her Apple Watch, has it delivered to her home, and “earns” the watch by completing activity goals. The watch is paired with the Attain smartphone app that helps users track their progress.
An even bigger indicator of telematics’ forays into health is Apple’s plans to launch a health insurance program in 2024. We are in a position to overturn current insurance industry standards.
These devices depict the day-to-day behavior of their customers, allowing providers to customize their products to meet their individual needs. Additionally, incorporating popular technology enables marketers to attract young people, a valuable and largely untapped potential customer subgroup in the life and health insurance space.
A perfect storm of inflation and rising costs, combined with cost-conscious customers, has forced insurers to think differently in a market where switching has never been easier. Many see the growing adoption of UBI as a way to create mutually beneficial relationships between policyholders and underwriters.
As technology and the Internet of Things further infiltrate standard underwriting practices, staying ahead is critical to attracting and retaining quality customers. Participating in a telematics program can be a key factor in transforming seemingly useless data points into meaningful customer insights.
Jeff Piotrowski is the insurance market leader for Verisk Marketing Solutions. Contact information is as follows: [email protected].
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