With the connected car market forecasted to grow at a five-year compound annual growth rate of 45 percent, according to research from Business Insider, its clear that telematics-based insurance programs will be an increasingly important part of insurers product offerings.
In the previous post, Rethinking Telematics: The Shift to Value, we discussed the importance of adopting a customer engagement-based approach to telematics and usage-based insurance (UBI) programs.
Having mapped out the strategy, what will it take to succeed in this dynamic market?
Here are five factors that are critical to the success of your telematics offering.
Differentiate by leveraging your own customer data
In the past, insurance companies preferred to jump-start their usage of telematics by using data collected by third parties such as the ISO. But to really differentiate from other players in the market, insurers need access to their own customers data. It is key to providing a differentiated offering. Whoever understands their customers best will be the most successful going forward.
Tapping your own customer data will enable you to develop insights into your customers driving behavior, based on which you can launch better products and services, and share these insights with your companys marketing department to develop the consumer value proposition in order to drive adoption.
Looking ahead, using this customer data, you can alert customers about changes or problems on the roads they usually take and possible damages that might occur. Through telematics, we see insurers moving from reactive engagement to proactive engagement, which will transform the customer experience.
Consider the mobile platform
Several years ago, the cost of the telematics black box was an entry barrier for insurers. An alternative is to leverage mobile devices as a means of gathering driving data. A smartphone-based solution removes the cost barrier to adopting telematics, it doesnt require connectivity to cars or any other devices, and provides an easy, intuitive, and convenient way for carriers to engage with customers. The smartphone ecosystem is expanding into cars, with technology behemoths such as Apple and Google offering connected car solutions, such as Car Play and Android Auto that extend smartphone technology and experience to cars.
Engage focused consumer segments
Insurers will increase adoption if they can devise engagement programs specific to target customer segments. For instance, to engage teen drivers traditionally viewed as a high-risk segment try gamification and use game progress to deliver messages on driving safety. This whitepaper throws light on how insurers can make good use of gamification in order to increase adoption.
Define the right business case and metrics for success
Insurers that are trying to make the business case for a telematics program, as well as identifying meaningful measures of success, are looking at both cost-savings opportunities, such as a reduction in claims costs, and intangible benefits such as customer engagement and transformed relationships. Telematics-based offerings can help auto insurers reach out to potential new customers, and also help with customer retention. Some insurers are measuring customer engagement related aspects of their telematics programs such as improved customer acquisition and retention.
Be a player in the new automotive industry ecosystem
Most auto insurers are struggling to catch up with the evolving smart car market. Insurers need to keep pace with the car evolution and be part of the journey – even working with other ecosystem partners where possible. The evolution of vehicle telematics to a dongle-free and eventually accessory-free solution shows why this is important. Insurers now are trying to get driving data directly from the car manufacturers and systems such as OnStar, in order to analyze consumer driving behavior.
The auto insurance and automotive business will see a lot of consolidation in the near future. Many players are trying to get into auto insurance even as premium manufacturers play in the insurance space. They know more about the car than an insurance company does they have complete data about the smart cars, and are better placed to collect information about the driving patterns exhibited by consumers. For example, Ford is using data from its connected vehicles to improve driving safety, influence product design, and analyze new business opportunities. Connected cars will evolve based on that ultimately to an autonomous car where the manufacturer may be liable for accidents.
With telematics, the entire auto insurance process, from onboarding to claims, will evolve in the coming years. If carriers start partnering with other stakeholders in the ecosystem, theres an opportunity to transform the customer experience.
Its all a means by which you can use telematics to engage customers as well as get rich data to improve or innovate future products and eventually, take telematics to the next level.