Discovering Rewards Platform That Work: Profiling Carrot Insurance

“The use of telematics is increasing and creating more data for insurance carriers to use when evaluating risk. The advantage of this is more accurate ratings based on how customers drive, faster claims reporting, better claims reports, and deeper customer engagement. The next step for insurance companies is working to build better drivers and make sure those drivers feel a connection to their carrier.”¹

Aite, Effective Driver Coaching Partnered with Telematics Improves Auto Claims and Customer Loyalty

Used intelligently, telematics data combined with rewards provides a proven way to improve loss ratios and encourage safer driving practices—for a very low cost investment to the insurer. Statistics show those areas where engagement and performance are strengthened. Captured vehicle and driver data can also reveal areas in which attempts to motivate driver behavior were not successful.

Straightforward and accessible rewards—rather than lackluster cash incentives—have been shown to engage policyholders and progressively improve driving habits. Rewards that are frequent and ongoing have better long-term success with policyholders—and are more effective at changing behavior—than infrequent or one-off rewards. Carrot Insurance focuses on developing customer-centric insurance programs. Using results from driving trials and extensive data analysis, Carrot Insurance introduced a pioneering rewards program that helped policyholders reduce premiums, engage regularly with the insurer, cut accident rates, and build confidence in their book of drivers. The approach has evolved into a full-featured insurance aggregation model with a smarter rewards program that has attracted notable insurers including RSA, Zurich, Aviva Insurance, and others.


Developing an Effective Rewards Program to Achieve Outcomes

Carrot Insurance began their investigation into techniques for improving driving performance through feedback and rewards. The objective was to realistically assess whether telematics data used in concert with a carefully designed rewards program could meet their objectives to increase driver engagement, reduce accident frequencies, encourage safe driving, and, ultimately, lead to improved loss ratios. Through this experience, Carrot discovered more effective ways to motivate safe driving behavior using a data-driven model—based on direct-to-consumer experience that sister company, IMS, teaches to insurers through workshops and advanced education.

Predictive analytics track and identify risk patterns and can proactively work with drivers to address concerns, in the process protecting partners through active risk management.


“As a purveyor of direct-to-consumer digital insurance, we at Carrot Insurance look at all aspects of driving behavior: braking, acceleration, lane changes, length of driving trips, time of day, and more. But, more importantly, our solution increases the engagement with policyholders, giving them feedback on their driving practices and positive reinforcement in the form of Treats (rewards) to be safer drivers. Safe-driving policyholders gain value from both rewards and premium reductions and, in turn, insurers can apply telematics data to business decision-making and enhance communications with policyholders—a winning combination.”

Norrie Erwin, Managing Director – Carrot Insurance


Positive Outcomes of the Carrot Insurance Model

As an example of the effectiveness of the Carrot Insurance model, over the last several years the Risk Management team communicated with over 40,000 policyholders about poor driving performance. The statistics compiled demonstrate the value to insurers.

  • Reduced frequency of accidents – For drivers using the program regularly, accidents are lowered by as much as 42 percent.
  • Opportunity to enter challenging market sectors – Through active risk management, young, inexperienced drivers can be signed to policies, incurring less impact on revenues.
  • Deeper insights into customer behavior – Data analytics deliver enhanced understanding of customer behavior for better decision-making.
  • Real-time behavior adjustment to improve safety – A large percentage of customers notified of their excessive speeding—65 percent—committed no further speeding breaches.

As shown in Figure 1, accident rates are significantly reduced among customers who check their scoring frequently and adjust driving behavior based on feedback. Other positive benefits, as shown, resulted from increased driver engagement.

Figure 1. Driver engagement yields strong results


From the perspective of the policyholders, they benefit from reduced premiums, confidence-building feedback, safer travel, and meaningful engagement with the insurer through the rewards program.

These statistics offer guidelines with plenty of room for insurers to develop programs unique to their driving population, program specifics, and demographics unique to targeted geographies.


Improving Loss-Ratio Values by Rewarding Drivers

Driving scores, developed through captured driving data analyzed by Carrot Insurance, correlate with the frequency of accidents and result in improvements to the loss-ratio values. As shown in Figure 2, there is a 14 percent loss-ratio improvement for every 2 points of portfolio score improvement. Analysis has also shown that a 1 or 2 percent investment in rewards yields a 7 percent cost of revenue (COR) benefit. This can typically pay for the rewards program expenses through accrued dividends.

Figure 2. Improving loss ratios with precise portfolio scoring


For more insights into how rewarding drivers can benefit both insurers and policyholders, download the Carrot Case Study, Capitalizing on a Rewards Program That Really Works for Insurers.


White Paper

Boosting Engagement and Capitalizing on Rewards

How to Make Insurance Telematics and UBI Fully Work.
Better engagement underlies increased adoption of usage-based insurance (UBI) and motivates customers to adjust driving behavior to achieve desired program outcomes.



¹Effective Driver Coaching Partnered with Telematics Improves Auto Claims and Customer Loyalty. Aite Group. February 2020. With-Telematics-02-21-2020.pdf