Insurance telematics has been out there for more than 20 years. Many insurers have tried to play with the technology, but few have succeeded in using the data available from connected telematics devices.
Executive SummaryMatteo Carbone, founder of the Connected Insurance Observatory, describes best practices of insurers using telematics technology successfully in the Italian auto market, where better insureds self-select discounted coverage and suites of services, providing insurers with 20 percent lower claims frequency than non-telematics insurers. Beyond achieving proximity with customers, the best carriers also improved their P&Ls by leveraging telematics data to effectively manage claims costs—reconstructing accidents to challenge repair costs and inflated claims, for example. Unlike efforts elsewhere that have failed, Italian insurers offer an upfront discount to all insureds using the technology rather than analyzing driving data to propose future discounts.
The potential of this technology was misunderstood, and best practices have remained almost unknown, as it was not common in the insurance sector to look for innovation in other geographies, such as Italy, where progress has been made.
Innovation Fits and Starts
Before focusing on this telematics success story, the broader topic of innovation in the insurance sector is worthy of attention. The insurance sector is currently being overtaken by a desire to change, and it’s becoming more and more common to see innovation scouting taking place on an international level.
Back in 2015, there were many analysts commenting on the lack of InsurTech startups and insurance startups, and only a limited amount of space was dedicated to the insurance sector within some fintech reports. But in the last two years, the interest in insurance innovation has grown in an unexpected way: Billions of dollars have been invested in insurance startups; there are now many innovation labs dedicated to helping incumbents experiment with new approaches; numerous startup accelerators dedicated to the insurance sector have popped up; many insurance carriers have created internal innovation units; and each week there are many conferences dealing with this topic. When talking to an insurance professional it is common to hear admiration for some of the new full-stack insurance startups and the desire to see these changes concretely adopted by incumbents.