Telematics Programs Can Help Improve Risk Mitigation and Pricing in Personal Auto Insurance
Personal auto insurance costs are based on a growing number of factors. Some of these, like a policyholder’s age, are out of the individual’s control. Other factors may be addressable by a customer, such as their credit score and address. It’s constantly evolving as insurers balance profitability with competitive rates.
Using telematics allows insurers to take accurate rating to another level. One of the main benefits of deploying telematics with personal auto insurance customers is that it allows for more customized pricing based on the individual’s actual driving habits.
Telematics in personal auto insurance refers to measuring policyholders’ driving habits using a mobile app or plug-in device to collect data that carriers use to calculate driving scores. These driving scores can help policyholders earn discounts on their premiums – or in some cases, they may end up paying more.
While different insurers measure different data points, some common metrics include how fast a driver accelerates, how hard they brake, whether they use their mobile device while driving, how many miles they drive, how much time they spend idling in traffic, and what times of day they drive.
Many insurers offer discounts for enrolling in these programs, with additional discounts possible based on insureds’ individual driving metrics. This idea appeals to many drivers who prefer to be rated based on their actual behaviors, not the more generic categories they may fit into.
Policyholders benefit from telematics in these ways:
- Increased transparency in pricing
- Greater control of costs and peace of mind from price more closely matching risk
- More awareness of safe driving habits and ways to improve risky behaviors
- Better visibility into how riskier habits can correlate with auto accidents and higher insurance premiums
- Improved safety through insights into the driving habits of teens and newer drivers on each policy
For insurers, the value of this data is exponential. Carriers can learn about traffic patterns, driving habits, and the safe driving skills of their insureds, which can be used to price risk more accurately.
The Value of Telematics in Personal Auto Insurance
A significant benefit of using telematics in personal auto insurance is the ability to price risk at the individual level. Insurers can incorporate the data gleaned from their telematics systems into their underwriting dashboard, allowing them to apply better insights into calculating each individual policyholder’s rate.
Using telematics also gives insurers more interactions with policyholders throughout the policy lifecycle, instead of simply at renewal times. This allows more opportunities to partner together to reduce risks and avoid losses before they happen. And a more engaged and educated consumer is more likely to stay with their insurer at renewal time.
Gamification is a popular component of some telematics apps. Some programs allow drivers to earn badges for safe driving habits, such as trips with no handheld device usage or hard braking incidents. The incentive to win awards in the app is a powerful motivator for many people, leading them to change their behaviors to continue earning rewards.
Insurers can utilize the data and touchpoints from a telematics program to form strong partnerships with their insureds. Instead of communicating only at renewal or billing times, insurers that use telematics programs can reach out frequently – leading to a predict-and-prevent philosophy of risk mitigation and risk management in which insurers provide tips and information targeted directly to insureds’ risk and exposures.
For example, an insurer may collect data showing that an insured often drives during the riskier late night and early morning hours. Knowing that drivers are often drowsy at these times, the carrier could send information about distracted and drowsy driving or even offer an incentive to drivers who stop for a coffee break.
This type of personalization is effective both in managing risks and building relationships – a true win-win scenario for insurers and policyholders.
How Insurers Can Unlock Telematics Data in Personal Auto Insurance
Tapping into the data unleashed by a robust telematics system means better pricing accuracy, improved customer engagement, and increased risk management and mitigation. Insurers who get this right can gain an advantage in the marketplace from competitive pricing that accurately reflects their insureds’ risk profiles.
See how Socotra’s CorePlus Auto connects seamlessly with telematics to unlock insights driven by your unique data in a personalized demo today.