Traditional commercial auto insurance models regularly fall short of assessing risk accurately, which can result in inefficiencies in both pricing and overall risk management. Telematics technology offers a powerful solution that is transforming the industry by addressing these challenges. Insurers who leverage data-rich telematics systems are better equipped to make informed decisions, improving their ability to assess risk at various stages – from quoting and underwriting to renewal.
One of the primary advantages telematics offers insurers is the ability to make data-driven decisions about a client’s risk profile. Traditional models rely heavily on general factors like fleet size, number of drivers or past driving records, which often fail to provide a complete picture of the fleet’s risk. Telematics for insurance companies provides nearly real-time data on how, when and where the vehicle is being driven. It enables insurers to benchmark the risk that they insure and create personalized policies that more accurately reflect the level of risk being insured. This leads to better pricing and more appropriate coverage.
Developing a telematics program can be daunting, but with a clear strategy it becomes a manageable and worthwhile endeavor. Drawing insights from SambaSafety’s work with over 4,000 insurance clients, we have identified six critical components that indicate success in telematics for insurance companies. These elements ensure that both insurers and their customers benefit from the telematics implementation.
One of the main hurdles in adopting telematics for insurance companies is sensitivity to sharing data. Although over 80% of fleets that we recently surveyed say telematics is important to their safety strategy, many of them aren’t sharing telematics data with their insurers. Successful telematics programs need to offer clear incentives that go further than offering a discount. Commercial insurers must articulate the value of the data to their customers, explaining how it will be used to help reduce risk and improve their insurance experience.
Transparency is vital for any telematics for insurance companies. The most effective programs are clear about what the insured can expect if they meet certain agreed upon risk metrics. By providing customers with tangible, measurable goals, such as adhering to speed limits or reducing hard braking incidents, you’re able to build trust. This transparency reassures customers that they have control over their insurance costs, which ultimately strengthens their relationship with the insurer.
The process of setting up and sharing telematics data should be as smooth as possible to avoid frustration and delays in implementation. A seamless onboarding experience is crucial to maintaining momentum and building a positive initial interaction with the program. Automating the process can enhance user experience and set a positive tone for the entire policy lifecycle.
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Data management is a key factor in the long-term sustainability of telematics programs. Insurers need to have a clear data acquisition strategy from the outset, especially considering the sheer volume of data generated by telematics devices.
Charles Smith, Vice President of Product at SambaSafety discusses in a recent Insurance Times interview how “just 1,000 vehicles can produce over 4.2 million data points per week, so holding all this data can be impractical.”
Without a plan in place to aggregate and analyze this data, the information can quickly become overwhelming. Successful programs focus on retaining key insights that are actionable and useful for risk assessment, rather than hoarding data.
To keep customers engaged, insurers must provide regular and meaningful touchpoints throughout the policy lifecycle. Training based on the customer’s driving data can be a great way to stay in touch and add value. Training is also a great way to reduce risk and frequency. Customers that we’ve worked with see up to a 77% reduction in violations within one year when they couple continuous driver monitoring with training.
Not all customers will engage with telematics data at the same level. Some may wish to take a deeper dive into the data, using insights to develop sophisticated risk management strategies for themselves. For insurers, offering additional resources such as risk consulting services, e-learning platforms or access to self-serve risk management software can create new revenue streams and differentiate you from competitors. Catering to these advanced users enhances customer loyalty and positions the business as a forward-thinking, tech-savvy company.
Telematics is no longer just a buzzword for insurance companies. It’s essential for the commercial auto insurance industry to gain stability and, eventually, reach profitability. The industry cannot afford too many more years like 2023, when there were 27 nuclear verdicts awarding over $100 million. With the right strategy, clear communication and customer-centric solutions, insurers can harness the power of telematics to enhance risk management, improve customer satisfaction and ultimately drive profitability.
Our upcoming 2024 Telematics Report: Connecting the Dots on Strategies & Adoption provides the most comprehensive view of the state of telematics in insurance and fleet safety.