Creating Value through Telematics and Usage-Based Insurance

car insurance usage-based telematics road

Telematics, the joining of communications and informatics, enables usage and behavioral driving data to be communicated with a third party, be it a commercial fleet conductor or an insurance carrier, sending useful information while the vehicle is in use. It can capture data such as a car’s location, speed, acceleration or braking, fuel consumption, and vehicle faults. With AAA reporting that at least one feature of Advanced Driver-Assisted Systems (ADAS) is available in nearly 93% of new cars, telematics becomes the main enabler of usage-based insurance, or UBI, offering the insurance company data that can be analyzed to inform business decisions.

In this new world of sophisticated insurance coverage, an insurance provider can track driver behavior, usage patterns, car maintenance, and how—and how often—safety features and best practices are utilized. All these are considered to assess risk and define rate structures.

Drivers with more risky tendencies will see higher premiums, and safer drivers will enjoy lower rates.

But pricing is merely the beginning of how insurers can leverage telematics. The evolution of telematics in auto insurance brings new opportunities to attract, land, and retain customers. It opens doors for insurance carriers to reach their target audience, offer personalized, tailored experiences to meet changing customer expectations, and deliver exceptional services that pleases customers in the long run. And throughout, it offers insurers the chance to use personalization to deliver higher value than the competition.

Attracting New Customers with Telematics-Driven UBI

Insurers often consider the benefits of UBI once the customer has been acquired. But the benefits of telematics, the technology that enables UBI, actually start during the sales process. Most customers shop for insurance when they buy a new car. That is a critical window in which insurance companies have an opportunity to stand out, and telematics can help. Companies can use telematics data on the type of car and the customer’s profile to build an attractive quote even before they collect more data on that individual’s driving habits.

A telematics-based quote gives the customer a personalized experience right off the bat, one that many customers have come to expect from other products, services, and digital shopping experiences in recent years. But it has additional benefits, too. A quote tailored to a specific car type or drive profile educates the customer early on the advantages of UBI. It demonstrates value immediately and proactively, rather than spending marketing budgets to convince the customer that they need a usage-based policy.

Telematics to Elevate the Customer Experience

Insurers can continue to create value from telematics and UBI once the customers have been secured, by leveraging data toward a better customer experience, helping customers file and resolve claims more efficiently, for instance. Customers expect seamless, convenient digital experiences from all the products and services they use, including from their car insurance. In fact, consumers rank convenience as second only to availability in drivers of new brand purchases, according to a 2020 McKinsey report. The ease with which they can submit a claim and receive information about that claim is critical.

Consider how telematics can come into play in the event of an accident. Ideally, the insurance carrier detects the accident through telematic data before the customer reports it. The carrier could reach out to the customer through various channels: text, in-app, or by phone, letting the customer respond at a time that works for them. Outreach could point the customer to a simple interface where they can submit photos of the damage, view repair shops in the area, and quickly contact a representative, should they have questions.

The customer experience can be further amplified through AI. Analytical models, combined with telematics, can make immediate decisions for insurers on total loss versus repair decisions and predict injury. And this information can be communicated to the customer, so they feel engaged and included in decisions about their policy.

The Benefits of Telematics and UBI

Insurers looking to differentiate will see significant opportunities across the customer journey to leverage telematics and UBI—and doing so will benefit them. For new customers, usage-based policies build trust early on, helping the customers feel cared for and meeting their personalization expectations. Existing customers will be more likely to report higher satisfaction rates and greater convenience, both of which increase the likelihood that customers stay in the long run.