Implementing a telematics strategy is the start of the journey, not the end, as the real prize lies in monetizing the vast treasure trove of data it yields.
Data is the table stakes for growth and the ability to compete enabling vast commercial success, precision and accuracy of insight in an otherwise imprecise world. It gives the potential to move from commoditized, price-driven players to value creators.
For insurers, this centers on smartphone telematics and harnessing the devices, which have taken a central role in seemingly all aspects of consumers’ lives, to tap into deep contextual and behavioral information that could forever change how the industry considers risk.
But is it all too good to be true? Will tapping into vast quantities of new data offer significant potential or does it create a whole new set of challenges that make the business case for moving beyond the traditional yearly purchase to an on-demand, usage-based model simply too hard to reconcile?
The benefits of smartphone telematics
Smartphone telematics offers a volume, variety, and velocity of data almost alien to an industry that’s relied on basic demographic and socio-economic profiling since its inception. The technology has the potential to catapult insurers from simply knowing who their drivers are and what they drive to understanding in minute detail how they drive, where, when and why.
The technological, analytical and data science skills required to understand and harness this data, knowing what to pay attention to, need building and nurturing. Not to mention the privacy, compliance and cybersecurity considerations that come with holding sensitive customer information.
All this requires leadership commitment and investment. Anyone who dismisses the implications of this new data, in favor of focusing solely on the opportunity is optimistic at best or misguided at worst.
Three pillars of monetization
Building a business case for both the technological and organizational investment in smartphone telematics hinges on three pillars.
Usage-based insurance isn’t simply a means to more accurate pricing, it holds the key to behavioral change. Understanding the realities of how individuals actually behave behind the wheel enables insurers to target higher-risk drivers and, with education and incentivization, help them to reduce risky driving.
This risk reduction also means more loyal customers. Harnessing the data from smartphone telematics to redefine segmentation can yield significant rewards.
Better communication channel
The omnipresence of a smartphone and the permission given by a driver adopting telematics-augmented policy gives insurers the opportunity to engage in real-time, low-cost and contextual digital communications with the customer that’s actively using, and deriving value from, their app. Reliance on mass-communication channels can be replaced with highly personalized, highly relevant messages to a receptive audience, driving significant efficiency in marketing spend.
The relationship between a motor insurer and a driver has never truly been one of love and affection. In reality, motor insurance is a grudge purchase for many and especially painful for younger drivers or those in higher-risk occupations or geographies. But by pivoting to a personal dialogue centered on the insurer providing value, annual shopping around for better deals can be challenged by a more meaningful relationship that goes beyond the yearly invoice. If a motor insurer has had 12 months to understand the customer as a person and has responded by offering incentives and benefits based on who they are, the propensity to place value on this relationship beyond price alone can be increased.
What data to collect?
The data trails which emerge from smartphone telematics have almost limitless potential, but they can be daunting, to say the least.
The best strategy in defining what kind of data you need is to review what kind of customer you’re targeting. After creating the best and worst buyer personas, you’ll clearly see what information you need.
After you’ve done the research, leave the data collection to us. Fill out the form and find out how we can help you get your insurance business on a new level with customers.