When telematics first arrived on the scene, carriers used it primarily to collect data for usage-based insurance (UBI) programs. However, persuading customers to buy into these kinds of programs wasnt easy the value wasnt clear, especially when they were being asked to share personal driving information with an insurer.
This scenario has slowly but steadily changed as auto insurers focus on customer engagement and leveraging digital platforms. How can you build on this momentum and capitalize on the potential service and operational benefits of telematics?
Embrace an engagement-based model
This is non-negotiable. Drive a shift in your approach to telematics – from strictly gathering data as part of a UBI program, to a more engagement and experience-based model. To understand why this is important, lets backtrack a little. Many early telematics and UBI programs stalled because consumers were reluctant to give their insurers permission to monitor and gather data on their driving habits. They had privacy concerns and felt their insurer was Big Brother, watching their every move. They didnt see the value of granting their carrier permission to gather data on their driving behavior.
Instead of just focusing on transactions, concentrate on demonstrating and delivering value to customers through telematics to increase adoption. This is also the key to addressing privacy concerns related to telematics offerings. Consumers generally appreciate regular feedback on their driving performance and are interested in improving their behavior behind the wheel. Carriers that can provide specific feedback and advise consumers on measures they can take to become better drivers will create value for their insureds. This will also drive a change in consumer perception – as they begin to see their insurers as concerned about their safe and wellbeing.
Offer intangible benefits and financial incentives
Customer discounts or rewards based on good driving behavior are another way you can provide value and address privacy concerns. Some analysts suggest that by offering a generous discount on premiums, insurers can convince consumers to compromise some privacy and share location data. The more value you provide through telematics, the more likely your customers will be willing to sacrifice some privacy to obtain those benefits. You will need to strike the right balance here, determining where incentives and financial penalties are most appropriate.
And value doesnt always have to be monetary. It can also be in terms of additional services your customers may appreciate for instance, recommending fuel-efficient routes, providing highway assistance on demand, etc.
Keep in mind that this approach works only when the value that such services offer is relevant to the consumer in a given context or is personalized to their needs.
Bring in transparency
Transparency is a critical aspect of the telematics value proposition. Ultimately, transparency is the key to customer adoption of telematics-based auto insurance offerings. Consumers want to be in control of their own driving data and activities. Providing full disclosure about how you will use the data obtained via telematics for example, how you obtain a drivers location data and how you are going to use it will help you address privacy concerns and build trust, which will positively impact the buy-in rate.
Even early adopters of telematics may be missing opportunities to optimize their investments in this still-evolving technology. When positioned properly, telematics should be a great way to engage with your customers, provide value and increase customer satisfaction.
Shifting your approach to telematics from simply data gathering to a richer, more personalized engagement and experience-based model can make you a leader in this increasingly competitive space.
[Part 2 of this series will examine other telematics success factors.]