Telematics—Six Critical Success Factors
Let’s continue our discussion of telematics for motor insurance by looking at some of the success factors—if you missed the earlier posts, you can catch up here.
Accenture believes there are six important success factors for insurers to bear in mind when developing a telematics strategy. These have varying degrees of priority depending on where an insurer is in its telematics journey.
1. Be quick and agile
Success in telematics requires quick and agile pilots, as well as the organisational ability to continuously learn, refine, enhance and scale. Insurers need to test and learn at a rapid pace while the market is maturing, so that they can scale up and expand the value proposition when the time is right.
Agile pilots will provide insurers with early insight into consumer and data issues; the opportunity to lead a particular market segment; and the chance to build and learn from data repositories.
2. Understand the telematics ROI
Regardless of the technology approach, telematics requires considerable upfront investment in devices, technology platforms, data management solutions and analytics. Insurers need a detailed understanding of the source of sustainable short- and long-term ROI, taking into account a whole range of factors, including customer retention and loyalty.
3. Adopt an integrated approach
Only a comprehensive, integrated approach to telematics will work. All parts of the organisation – including marketing, underwriting, claims, and IT – must be aligned with the program and be prepared for continuous adjustment and development.
4. Understand your current limitations and get the technology right
Much of the burden of a telematics program will fall on IT and insurers’ technology platforms. An honest, rigorous assessment of a platform’s ability to collect, organise and store vast quantities of data is essential to any program launch. Insurers cannot afford to underestimate the difficulties of data capture and its application for the business.
5. Put the customer at the centre of the strategy
No matter how good the device or how skilled the implementation, telematics will only succeed if it provides value to the end customer. This requires an in-depth understanding of customer motivations and reservations and driver psychology, as well as the incentives to opt in, maintain engagement and retain at renewal.
Insurers need to develop telematics propositions that can be modified in order to drive engagement among different customer segments and provide value for end customers as well as brokers and agents. A good telematics strategy will therefore make extensive use of insight-driven, predictive analytics.
6. View telematics as just the beginning
Positive selection bias and lower premium rates will drive initial customer uptake. However, insurers will need to offer additional sustainable value to incentivise the mass market.
The key to driving broad-based adoption is the vast potential for location-based value-added services. With the data derived from telematics, insurers can offer tailored value-added services to their customers, based on much richer knowledge and understanding.
These services have the potential to change how consumers perceive telematics. However, they also have the potential to fundamentally shift the role of an insurance company in the eyes of consumers.
If insurers fail to grasp this opportunity to engage with their customers on a personalised level through tailored products, pricing and value-added services, there is a danger other players and other industries will step in.
In my final post, I’ll round off with a look at why telematics is at the tipping point. To read the other posts in this series, click here. Or for a detailed look at this topic, look at our report, Insurance Telematics: A Game-changing Opportunity for the Industry.