Smarter auto insurance for a hyperconnected world

Insurance is about assessing, managing and transferring risk. Telematics enables insurance to be done in a smarter way by offering a personalised experience to policyholders. The reasons for using telematics data are wide-ranging: improving customer engagement; impacting core insurance processes; using the new knowledge about policyholders and their risks; and improving sustainability and the creation of value-added services.

 

Earnix has mastered the usage of this data for pricing sophistication, making telematics data available as a core component of the analytical rating engine. Such steps enable carriers to fully leverage the availability of data across the board to rate and price consumers accordingly. The same data also has a valuable personalisation appeal to make commercial offers to customers and use those elements as a strategic retention tool when it’s the right time to do so.

 

By doing so, insurance carriers will better understand their customer profiles and risks, improving sales and profitability and making the usage of telematics data a concrete opportunity in all geographies.

 

The US market has focused the most on the usage of telematics data for enabling continuous underwriting use cases. Robust evidence has clarified the economic benefit of sophisticated telematics-based pricing, and more large incumbents are exploiting the opportunity to personalise their pricing.

 

We believe that this pricing approach will help usage-based insurance (UBI) move to the next level of adoption, convincing motor insurers that driving data is no longer something to experiment with just because competitors have it. It’s truly an element that cannot be disregarded in managing today’s motor business.

 

At a global level, more than 20 million policyholders exchanged telematics data in 2020. Some insurers worldwide have already successfully introduced a wide range of telematics-based applications. However, motor insurance telematics is still at the beginning of the development curve. Based on research from the IoT Insurance Observatory, there are less than 10 insurers globally with a portfolio bigger than one million telematics-based policies.

 

In Europe, usage of telematics data has not yet scaled to its full potential and still is rarely used to assess drivers’ risks for modelling. UBI is either a small niche or telematics usage is limited to risk selection and claims management where it has scaled. The two most advanced markets have been Italy and UK, with recent developments in Germany.

 

In the UK, UBI is still considered a product for young drivers. The opportunity to move from a niche underwriting solution focused on younger and low-mileage drivers to a mainstream solution broadly applied to motor portfolios has still to be addressed.

 

Italian personal auto insurance is still globally in a leading position regarding telematics portfolio size, value proposition towards its customers and demand for such services. In this market, telematics was already present in 21.5 percent of personal motor policies at the end of 2021. Telematics data are used across various use cases in the insurance value chain, with many insurers mastering its usage for self-selection of the risks, for claim management and for delivering services to policyholders, increasing the robustness of business cases for the insurance company.

 

European markets can leverage the recent development in the US market, where the transition to the less expensive mobile-based approach has driven growth and made the business cases more sustainable.

 

Meanwhile, technology and the usage of data in our society have scaled very fast. Consumers love to interact with their smartphones and digital tools and large tech companies have managed to address consumers’ needs based on the collected data with highly targeted offers that consumers seem to like. A mobile-based approach is also truly great for pricing and underwriting due to the nature of the data collected, which reflects the risk of the individual and their mobility.

 

The usage of telematics data will continue to grow as the experience of the carriers will mature and the cost of technology will lower, making it very accessible for many. Data sources will also increase, letting carriers select and create a powerful mix of elements that will help to better assess risks. Despite all this, carriers will have to make further efforts to use telematics data as part of their core processes and take full advantage across all their operations.

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 By Matteo Carbone, Director, IoT Insurance Observatory, and Massimiliano Kisvarday, Sales Director Telematics, Earnix