The insurance world has been never called upon to change like this. It is asked, by technology evolution, by customers savviness, and further the need for new business models, to develop analytical skills based on big data, building algorithms that include where, when and how the customer wants to be protected. More than one reason to turn into a “lifestyle coach” that directs habits and behaviours: the goal is not just risk management, but its reduction upstream.
This becomes even more urgent if we think about the relentless evolution taking over the automotive space, and how much telematics and insurance represent the two sides of the same icon.The insurance telematics market is rapidly on the rise and the market reservoir is vast.
1. According with Octotelematics data, by the end of 2014, there were ca. 4.8 million active insurance telematics policies in the Europe with an annual growth rate of 42.4%. In fact, the total number of insurance telematics policies in Europe is expected to top 28 million by 2019. In North America, the total number of insurance telematics policies is expected to reach 32.5 million by 2019, at an annual growth rate of over 50%.
A fearsome Big Brother? Customers’ perspective
One of the biggest challenge in this digital transformation process will be facing customers beliefs on data collection, as well as finding out useful services to make the increasing real-time customer monitoring more than acceptable.
It is common sense customers aren’t used to see their insurer like a potential alley, but they see it more like a money-sucker instead. This is the first step that the insurance industry must take: change their customer perspective in order to gain the maximum diffusion of this revolution in the insurance world.
Let’s go deeper in details. A Black-box based insurance works when a car is fitted with a small ‘black box’ device, about the size of a smartphone, which records speed, distance travelled and the time of day or night that drivers are on the road. This tiny device is also able to assess the driving style by monitoring braking and cornering, which in turn allows the driver to have car insurance with no down payments.
Moreover what all of this can look like – another attempt of the insurance company to gather more data from their customers – there is evidence to talk about win-win solutions for both parts.
2. Customers can achieve more tailor-made pricing and solutions or, even better, they could obtain better and faster assistance in case of accident or receive preventive notification whether the engine requires maintenance.
Let’s turn the tables: the insured allows for more data sharing about driving behaviour for a better and personalized shelter, based on real needs. It’s all about changing the vision from a standardized historical risk view to an approach based on real time and personal data.
Black box insurance drawbacks
Drivers that usually belong to historically negative risk profiles are one of the categories who can benefit more from such technology application over time. One out of five drivers has an accident in the first year driving, 26% on the road accident involve at least one driver aged between 17 and 24 and the majority of accidents that take place on Fridays and Saturdays involve at least a young driver (source: Road Safety Observatory).
It’s pretty common for young drivers been paying very high and unsustainable insurance premiums for many years, because time series clearly demonstrate they are a risky category. According to this view, Telematics and black boxes can finally give them the chance to challenge statistics. Premiums are based primarily on a driver’s current behaviour, which gives them an opportunity to demonstrate that they are capable and responsible behind the wheel.
3. If from a side the insurance 4.0 shows itself like a much fairer system, there are other conditions and categories that can find it more expensive without true advantages. For example the cost of the ‘black box’ and its installation added to the cost of the cover is the first point which could bother potential customers. Octo telematics tried to overcome these limits with the creation of devices that don’t need any technical intervention for the installation.
It’s not only about tech, It’s all about value
Big data and the Internet of Things; Smartphones and other devices collect a huge quantity of disjointed data and the truth is that people aren’t aware of this. Our routines, our transfers, our preferences, everything is gathered by our devices. Said that, people are even less conscious that, if they allow to make sense of that data, results may be amazing.
Beyond the traditional benefits of the GPS tracking (e.g: better location in case of theft or accident), future black boxes insurance policies may evaluate the driving style, not only for profiling purposes, but also in order to endorse behavioral changings and award good practices. This is the additional value that the insurance industry may aim at: support and suggest good habits, based on the attitudes of that specific driver in order to leverage on real benefits related to consumptions, savings, safety and even discounts on the policy’s renewal.
1 Octotelematics https://www.octotelematics.com/focus-on/insurance-telematics-trends-europe-north-america
2 Atooma Blog blog.atooma.com – article by Gioia Pistola
3 Money supermarket.com https://www.moneysupermarket.com/car-insurance/how-does-black-box-insurance-work/