By Stephen Pass, Senior Industry Consultant, Teradata
The roll-out of telematics is quietly revolutionising the motor insurance industry. With insurers no longer able to use gender as a factor in calculating premiums as a result of new EU regulations, for example, the use of telematics to assess premiums on a case-by-case basis will become critical in driving competitiveness in a tough market.
As well as enabling drivers to lower their premiums, data-rich telematics devices offers insurers tremendous potentialthat extends beyond traditional areas of risk, discounting and pricing. For this reason, many companiesare now looking to sophisticated data technologies to become their ‘eyes and ears’ on the ground.
There is no doubt as to the growing importance of telematics. As the concept of the ‘connected vehicle’ continues to emerge, it is estimated that, by 2025, 600 million cars globally will have embedded telematics. The result will be that vehicles will represent 5% of all connected devices, compared to just 0.1% today.
As a result, telematics has become a key industry issue, with providers offering a variety of solutions tailored to the insurance market. Yet despite the inevitable hype around the potential benefits to be gained, too many companies remain blinkered by a traditional departmental approach to data management, constrained by concerns over legal issues of data ownership, privacy and the cost of data storage.
Insurers are isolating ‘black box’ telemetry data within data silos and in some cases are not even bringing data in-house, as their goal is simply to establish customer driving scores as the basis of setting commercially-competitive premiums. By focusing on telematics as a way to secure operational improvement, they are missing out on the consequential value which telematics can offer.
With tools available to enable the business to look at telematics in the broader context of other customer and context data within the business, the time has come to broaden the focus beyond the operational value of better pricing and segmentation.
As in other areas of insurance, companies are trying to find out as much information as they can about their customers.In achieving this objective, the advent of telematics means that they can now gain a much clearer perspective on each individual’s behaviour behind the wheel, including speeds, braking and other driving habits.
This is extremely valuable but can only present part of the picture in developing premiums and responding to claims more effectively. Every insurer has a lot of other valuable customer and context data sitting within the business, yet this has remained hidden when making critical judgements around setting premiums and assessing culpability in the event of a claim.
In responding to this, it is now possible to link telematics data with real time customer behavioural and lifestyle information, images and other contextual data, in order to take into account everything relevant to the interaction with that customer. Technology solutions can bring together telematics data with other relevant information in order to make more informed assessments on all aspects of the customer relationship.
Traditional data warehousing solutions can be integrated with a discovery platform as part of a unified data architecture. For the first time, this allows the business to access and analyse different data types and styles –multi-structured data – in a way that was simply not possible using data warehousing tools in isolation.
By putting together a comprehensive picture of individuals and their lifestyles, this enables the insurer to create a more competitive personalised premium which more accurately reflects the level of risk in each case.
At the same time, the greater analytic value of this approach will also reduce the growing number of fraudulent ‘cash for crash’ claims, for example, by identifying those behaviours which might indicate a higher potential risk. Greater customer insights also enable the creation of more targeted cross-sell and upsell opportunities, into such areas as life insurance.
An integrated approach
Insurance companies now understand the need to make best use of telematics data, in order to maintain and improve their competitiveness. Yet to-date, very few have recognised that the real ‘win’
here is to be able to analyse this information at a more granular level and in a broader context.
They typically already hold all this information within the business. The adoption of a robust unified discovery platform takes the business substantially closer to the ideal 360 degree customer view, by pulling together telematics with established customer data, newer behavioural information around how the customer interacts with the business online and other social behaviours. And in so doing, this means that the insurer can achieve a significantly better return on their often substantial telematics investment.
This broader approach also impacts dramatically on usage-based insurance (UBI) or ‘pay for how you drive’ programmes. Again, telematics provides real insights into the behaviours and driving patterns of insured customers, yet leveraging this data in conjunction with non-telematic informationdelivers much greater benefits.
For example, in the event of an accident, this enables the business to better assess a customer’s liability for the purposes of settlement and/or subrogation. Apportioning liability in claims can be complex, as it is typically based on the statements of the parties involved and those of eyewitnesses, which may not always be objective nor accurately reflect events as they actually occurred.
Comparing objective telematics data from all the vehicles involved makes allocation of liability much easier, enabling the process to resolved more quickly and efficiently. Yet by adding the ability to query traditional claims, policy information and weather and traffic conditions at the same time, this would go much further in presenting a complete picture of the circumstances around the claim.
Determination of liability could be made solely by running a query, avoiding the time and expense of taking statements. By cutting expenses and resolving claims more quickly, the cost of settlements would be reduced and customer satisfaction levels raised.
Benefits for all
The race is on for insurers to get the most from the rich vein of data telematics offers, in order to make the most effective and informed decisions. Yet as in many other aspects of the business, this can only truly be achieved through moving away from yesterday’s silos to a more transparent centralised view of all aspects of the customer journey.
By incorporating telematics within a broader unified delivery platform, the insurer can increase retention rates, improve operational efficiencies and cut fraud, while the customer benefits from a faster, more personalised response to claims and other interactions with the business.Everybody wins.