Accelerate the Adoption of Telematics Insurance
3.5 Billion Smartphone Users Globally – Should More Auto Insurance Solutions Evolve to Mobile Telematics?
Mobile telematics presents a unique opportunity to transform the telematics and usage-based insurance market by leveraging technology the majority of consumers already have, a smartphone, to cost-effectively capture driving behavior and enable consumers to engage with that data in a more frequent manner. By 2021, globally there will be 3.8 billion smartphone users compared to the 3.5 billion smartphone users active today.
Primary Considerations for Mobile Telematics Success
To equitably evaluate the business case issues associated with telematics programs, each organization needs to establish a set of objectives and consider them in relation to the characteristics of a particular UBI plan.
A bedrock requirement of automotive insurance companies is ensuring profitable growth, and, particularly in the case of mutuals, assuring member satisfaction. Acceptable levels of profit depend on assessing driver risks realistically, maintaining costs, investing funds wisely, and pricing long-term risks properly.
Aligning to Corporate Objectives
When evaluating an insurance mobile telematics program, it is important to realistically calculate revenues and profits and measure them against company objectives. In addition to concrete financial considerations, companies should also define in the planning stage what they would like to achieve through an mobile insurance telematics program. Possible goals to consider in this regard include the following:
- Market position: Can mobile telematics help the company reach the market standing envisioned?
What rank is realistic and achievable?
- Segment position: What rank does the carrier want to reach in a specific segment
of the business?
- Channel position: Can mobile telematics help achieve dominance of a specific insurance delivery
channel, such as direct, agent, or broker, depending on the region?
- Discipline strength: In what discipline should the carrier seek recognition? For example,
is it better to focus on actuarial expertise, digital communications, technological excellence,
or another strength?
- Consumer perception: What program characteristics does the carrier want to highlight?
Possibilities include offering the best price, providing the best customer service, or ensuring
Complying with Mandates
The insurance industry operates under strict regulatory mandates from various levels of government. The degree of profit an insurance company can make is often dictated by these regulations, which is something that needs to be factored into any discussion of the business value of UBI.
The precision of telematics data and the accuracy of predictive algorithms can help enhance profitability by reducing the loss ratio—without violating regulatory mandates. A reputable TSP with expertise in this area can partner with companies to help deal with the constraints and recommend an approach to contend with the limitations.
The basic concept underscores the value of improving efficiency—meeting regulatory guidelines while also establishing a path for improved revenue growth. By drawing on more precise data, insurers can improve claims predictions and forecasts, invest capital more efficiently, and remain highly responsive to the customer base.