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Telematics and Usage-Based Insurance: Usage to Innovation to Disruption

While the use of Telematics is just getting traction (pun intended) with insurance in Canada, it seems that some organizations elsewhere have already started releasing innovative product and marketing twists to engage, and retain, customers.  Insurance-Canada.ca is currently conducting a survey and is looking for your opinions and questions to pose to an expert panel at the 2013 Insurance-Canada.ca Technology Conference.

Who is doing what to whom now ….

The recently released Insurance Telematics Report 2013 from Telematics Update contains a good summary of Telematics usage in various parts of the world.  According to the report, premium reductions are the initial draw for many consumers, and, consequently the focus of many leading Telematics implementers (in the US, Progressive Insurance is the leading implementer in this category).   The report notes, however, that other insurers are taking a different tack, providing feedback to drivers which will reward good driving habits (State Farm being a leader in this field).

Even more recently, another group has emerged which reward other behaviours and offer value added services (VAS). Some leading Telematics experts  suggest that  these offerings may very well become the ‘sticky’ ingredient required for customer retention.  If so, the results could be very disruptive.Dashboard

Segmentation plus Innovation …

An example of a unique approach is a new product offered  by Oregon-based MetroMile which combines Usage Based Insurance (Pay As You Drive) with unique customer facing tools designed to engage a segment of younger drivers who are driving less.  According to the MetroMile web site, “We started MetroMile because we believe the people leading the lower-mileage trend should be rewarded. We also believe products such as car insurance are not reacting quickly enough to meet the specialized needs of this group.”

The tools include an on-board device (called the Metronome) which provides data to the insurer and feedback to the insured on the driver’s habits relative to mileage, fuel consumption, cost of insurance, etc.  These data can be aggregated on the driver’s device of choice.

Anthony O’Donnell, writing in Insurance & Technology, says that the emergence of MetroMile’s product and marketing has several important lessons for insurers.  First, the innovation shown in the  data driven product targeted to a specific audience poses a real threat to established carriers who are looking at Telematics as simply an adjunct to other underwriting tools.

In addition, the relationship of a data empowered client based with an focused insurer show how loss mitigation may shape the personal lines market including, but not limited to automobile.  O’Donnell writes: “Loss prevention is well-traveled territory in commercial insurance, but both engagement technologies and data distribution could bring the art to new levels.”

What do you think …

Insurance-Canada.ca is conducting a survey to gauge views on current and potential use of Telematics for insurance in Canada.  You can participate by clicking here.  The survey results will be uses at the During the Telematics Boot Camp at the 2013 Insurance-Canada.ca Technology Conference, and questions will be posed to a panel of experts (moderated by Telematics Update Managing Director, Precksha Saksena-Sood).  Details on the Boot Camp and Conference Registration can be found by clicking here.

We’d also be interested in comments you have and would like to share below.

 

One Comment

Blair Currie

I agree that insurance telematics is starting to gain traction and we see an increasing number of carriers joining in the conferences and starting early conversations on the subject.

Canadian insurers have a unique chance to learn from both the successes and challenges that the US and UK carriers have experienced, and that we will have some new business models in Canada.

For example, the Canadian insurers might look into both discounts and surcharges for good and “below average” drivers, respectively. The carriers might also look at segmentation beyond low mileage to younger drivers, mature drivers, drivers who have a “blemish” on their records etc.
It’s important to keep in mind that much of the US industry has been shaped and sometimes restricted by Progressive’s business process patents, which have limited some innovation. Thankfully the Canadian courts do not tend to support business process patents, north of the border.

Technology also continues to change as there are devices available that blend the telematics – which has been the mainstay of UBI programs – with infotainment. This can allow real time feedback that is both inbound and outbound from vehicles. It can also allow Value added services (VAS) such as eCalls.

Experienced telematics service provides will know that consumer adoption is a barrier that needs both strategic and tactical initiatives to overcome. Strategically the VAS can help, and there are tactical measures, such as “carrots and stick” that can move an average deployment to a great deployment. That’s why it pays to turn to an experienced provider.

Finally we’re also looking forward to a good turnout at the Insurance Canada Technology Conference 2013 and the UBI Boot Camp.

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