Insurance Telematics: are insurers completely wasting the opportunity?
July 27, 2015
I had the pleasure of attending a major conference on Insurance Telematics last week.
The great and the good were there, with some of the big names getting involved in the presentations, and a whole host of large and small players in attendance.
What is clear is that Telematics, whilst still a very small part of the insurance business today (both in terms of GWP and policies), is becoming an increasingly important area of focus for insurers, and will continue to grow as firms learn and evolve their approach. Everyone is trying to understand how Telematics can help their business, whether they should be investing, where they should be investing…
But I couldn't help but feel, throughout the conference and particularly on reflection, that insurers are completely missing the point.
The focus is very much on the value of Telematics to the insurer. New data sources, real-time view of customers, more sophisticated risk profiles… The benefits of Telematics are clear for an insurer, from an underwriting perspective, as well as increasingly from a claims indemnity perspective. This is all wonderful, but frankly, at less than 500k policies across the whole industry… who cares?!
What the industry seems to be missing is this - all that really matters is the customer. Reducing the premium cost is all well and good for a young driver, but if you believe a small reduction in premium is going to cut it in other segments… well, you're going to have a very tough time making telematics work for your business, as no-one is going to buy your products!
Telematics is a great source of new, real-time, individual-specific, clean data. But the opportunity here is not to manage your risk better – it is to take this information and use it to deliver the most compelling proposition possible for the customer.
Insurance is a commodity business, pure and simple. Customers don't care who is providing the policy – insurance is insurance (for the most part), and currently the only real differentiator is price. Telematics can change all of that, by allowing insurance companies to offer much more value to customers – not just a piece of paper (or a PDF if you're a particularly digital insurer…), but a personalised, engaging service, where the insurance itself is really just the minimum.
What does this compelling proposition look like? Look at Vitality Health and their approach… a fantastic example of how a simple, engaging app has meant that customers now interact with their health insurer on a daily basis. There is no reason that, with a bit of help perhaps, other insurers within every segment cannot utilise the power of telematics to deliver an enhanced experience for their customers. And imagine the benefits to your business if you could achieve that level of engagement!
Furthermore, a compelling proposition does not involve retail discounts or cinema tickets at its core (although they might help). Everyone from your bank, to cashback companies, to your dry cleaner is offering these… It has to be something that makes your customer's life better. And this is a fundamentally different way of looking at Telematics… one which the industry has seemingly not yet grasped.