One of the most significant changes in the insurance space across the globe is the evolving markets and customer behaviour. Studies have proven that over 25% of the insurance customers today rely heavily on the digital channels to research, gain knowledge and make their insurance policy purchases. It is not very surprising since the current generation is completely online, hooked on their smart phones all the time. Insurance leaders have therefore incorporated the Internet of Things (IoT) and other connected devices into their solutions to offer better service to the customers.
Digital transformation has made way for new technologies to come into play, helping the companies create a differentiating factor among competition. This is where telematics helps gain an edge, giving insurers access to information that was earlier unavailable. We had written earlier about how telematics has transformed the claims function, and in this post, we shall focus on underwriting services.
Telematics & underwriting
Telematics insurance is quite a new approach to the field of insurance. How it works is by installing a black box of sorts [the size of a smartphone] in the policyholder’s car/vehicle. This constantly collects data related to the type of car, speed, distance travelled, driving style, driving patterns, driver behaviour and even how the person handles sharp turns or speed bumps. Apart from these, it keeps track of the vehicle’s movement at all times and overall performance as well. The device not only records, but also shares the data with the insurers and vehicle owners/drivers.
The insurance leaders are very interested in this data gathered by the telematics device. The structured and unstructured data gathered is then analyzed, and reports generated that help the insurer offer better underwriting services. The insurer can assess the risk profiles, premium pricing and make informed decisions on products suitable for the policyholder.
What is called “usage-based” insurance, telematics allows the insurers to establish a profile for the customer, and offer them personalized products, with flexible pricing when it comes to motor insurance. Basically, the policyholder stands to benefit if they are a careful driver/user. The entire system works based on the data that is derived from the customer’s behaviour and lifestyle patterns.
For underwriters, this allows for opportunity to control and set premiums based on the risk category the driver falls into. The data is available in real time for the users and the insurers, and therefore it is completely transparent.
By constantly collecting and processing the user based data, the insurance company builds an entire picture of the user/driver that is quite comprehensive when compared to the traditional methods of data gathering. Instead of filling out multiple forms, and going in person to assess the driving abilities or the vehicle, it is all completed with the help of technology. Similarly, insurers have more data to rely on and therefore make better-informed decisions, which increases the engagement and relationship with the customers.
The customers become aware of their behaviour and driving patterns, and telematics actually encourages them to drive well, as it helps them save money spent on premiums. But how open are people to incorporating telematics systems in their vehicles? Here is a study by Deloitte that shows the role age plays. [image below]
It is true that there is a rise in the number of insurance carriers who are likely to adopt this system of behavioral-based telematics as a means to substitute traditional underwriting factors. While there are plenty of advantages to telematics in insurance, it does raise a few privacy related questions. For example, can the insurers use the data captured for the sole purpose of calculating car insurance premiums to assess other categories of insurance? How safe and secure is the data captured by the system and who has access to the same?
At Neutrinos, we have an experienced team and a full suite of digital insurance solutions and services designed exclusively for insurance enterprises. We are helping insurers overcome challenges and deliver applications that rate high on customer satisfaction. We have been bridging process gaps, streamlining claims processes, introducing automated workflows and work logic.
Neutrinos built an incident and claim management app for one of South Africa’s leading financial service providers who operate several of South Africa’s leading insurance brands. Are you curious to know how to enhance your underwriting process?
Talk to our experts for more details.