Telematics is revolutionising insurance through behavioural and contextual analytics
22 August 2016
Data is transforming the insurance industry but you need a clear strategy to change this raw material into actionable insight to drive business decisions.
Matteo Carbone, principal, Bain & Company, founder and responsible for the Connected Insurance Observatory & Jonathan Hewett, global chief marketing officer, Octo Telematics
The insurance contract was invented in Italy in the 14th century for the needs of mariners and as a way of “insuring” the risk to cargo. The price was based on the commander’s experience and the route or journey taken.
Telematics has come of age in Italy – 16 per cent of auto insurance contracts feature telematics devices, bringing the insurance sector telematics data that allows for pricing based on the driver’s journey instead on a snapshot of static data at the beginning of the year.
Matteo Carbone, principal at Bain & Company, explains: “65 per cent of insurance carriers that joined the Connected Insurance Observatory – the think tank I created with the ANIA – declared they already saw a material impact of telematics on their way to compete on the Italian motor insurance market.”
Telematics is not a new topic, but there are many myths and a lack of awareness about how to generate concrete value.
“This technology supports not just pricing but the management and payment of claims, together with nurturing customer relationships,” says Jonathan Hewett, group chief marketing officer at Octo Telematics. “Each carrier in every market has the opportunity to execute a unique strategy.
“The best practice on the Italian market was not focused on usage-based pricing,” continued Carbone. “Instead, they were able to achieve material economic benefit using telematics data for risk selection and claims management. “Their business case was based on the sharing of part of this economic value with clients and distributors. The Italian experience was characterised by the collaboration between incumbent and tech newcomers, and we could say the Italian market experimented with the InsurTech trend 15 years before this term started to be commonly used.”
More than 25 different insurers in the Italian market are using telematics technology thanks to this “open innovation” approach to the outsourcing of telematics activities to a specialised telematics service provider.
Octo Telematics is the leader of this story. In the last 15 years, the company has helped many long-established insurance institutions to use telematics data as the enabler of the re-invention of their auto insurance approach and to stay constantly at the frontier of innovation.