Auto insurance is one the industry’s mainstays, and its availability has underpinned our reliance on the internal-combustion engine. Telematics has the potential to disrupt the auto insurance market, but also offers an immediate opportunity for auto insurers to refine their traditional product by relating risk (and thus premiums) to driving behavior, and reduce risk by providing a way to locate stolen vehicle.
But stopping there would be fatal. Carriers need to take further steps to move into the risk management role by offering customers data on their driving habits linked to advice for improvement. Not to forget access to advanced driving courses, route and weather alerts and immediate response to accidents identified by the telematics unit.
This is better, but there is yet more that insurers can do to integrate themselves into their customers’ lives using telematics. Some ideas might be location-based concierge-type services related to restaurants or places to overnight, preferred access to gas stations or the insurer car repair network, and various flavors of loyalty and affinity programs.
All of these location-based services offer ways for the insurer to position itself not just as a risk insurer or even manager, but as a valued lifestyle partner. Instead of a claim- or premium-related interaction at widely spaced intervals, telematics gives insurers the opportunity to build new customer intimacy based on a continuous stream of information. Insurers could also foster the creation of a community of insured drivers, just as Waze (recently acquired by Google) uses location information to create a community aimed at sharing traffic information and more.
Business models to underpin all of this remain unclear at this stage, but it seems likely that insurers will have to create ecosystems of providers to help them deliver. In all cases the real benefit will be the torrents of data that will flow out of telematics systems, data that can be used to build an increasingly accurate picture of the individual customer—what experience he or she is having, and what experience he or she wants to have.
Accenture believes that insurer should be taking a long view on telematics because it will be easy to be left behind. Already, Progressive’s Snapshot is passing the 10-billion-mile marker, generates more than $ 2 billion of premium in the United States and prepares its next generation telematics offering. Its example shows that the opportunities to reap first-mover advantage are huge—but the window of opportunity will rapidly fade away.
Finally, as car makers add an ever-increasing array of driving aids into their connected cars, insurers need to position themselves now in the connected car eco-system in order to prepare for a world were driverless cars will become the norm and they may no longer be naturally in the driving seat of the auto insurance market..
Next time, let’s consider the smart building.