Telematics data is a game-changer for auto insurers because it is highly predictive of risk based on driving habits. Leveraging driving behavior insights to rate policies can increase profitability and improve the customer experience.
With shifting expectations from both insurers and consumers, the auto insurance industry is evolving. Insurers want as much information as possible about all the variables that provide a clearer picture of risk propensity when quoting or renewing an auto insurance policy. On the other hand, consumers demand a more streamlined and personalized experience in exchange for sharing their driving data. Prospects as well as existing customers want to make sure they’re quoted a fair premium and receive any applicable benefits they can receive based on their good driving behavior, as seen in Figure 1. Telematics is becoming the thread that ties these wants from both the insurer and their customer together.
Figure 1. LexisNexis 2018 consumer research indicates consumers welcome telematics as a rating variable.
Including a telematics-based score in your rating plan can improve your ability to more accurately segment driver risk down to the individual level, leading to premium prices that better align with individual loss propensity. However, a rating is only as good as the effectiveness of the scoring model from which it is derived. To get a clearer picture of risk, you need robust and sophisticated scoring models that efficiently and effectively draw from the right data sources to give you the information you need. There are now robust telematics-based scoring models you can add to your toolbox to help you better assess risk.
