Behavior-based auto insurance—where carriers rely on telematics to gather driving data that shapes a customer’s rates—appears to have a largely untapped audience.
A new driver survey sponsored by telematics company Cambridge Mobile Telematics found that most believe rates should be based on how safely they drive, a concept made possible by telematics. About 73 percent of 718 drivers surveyed believed this. By contrast, only 4 percent supported the idea that auto insurance rates should be based on traditional factors such as parking location, age, gender, marital status and credit score. Just 8 percent backed the use of income as a factor in setting insurance rates.
On the other hand, just 22 percent of drivers surveyed said they have been offered a behavior-based insurance program, reflecting some untapped potential demand.
CMT cited an analysis of data from its DriveWell program suggesting how well telematics can reduce risk and, as a result, rates. After 30 days of enrollment, there was an average 35 percent reduction in phone distraction and a 20 percent dip in both speeding and hard breaking, the firm said. Telematics policies can help reduce rates because the monitoring leads to improved behavior.
Considering that telematics can provide more transparency to rate setting, carriers might also want to consider what respondents said would push them to consider switching insurers:
- 75 percent said a big price increase would do the trick.
- 62 percent said they’d leave over poor customer service.
- 56 percent said they’d walk if an insurer couldn’t quickly and effectively address claims.
- 54 percent said they’d seek a new carrier if they didn’t get a fair claims payout.
- 47 percent said a lack of transparency into rate increases and pricing would encourage them to jump ship.
Telematics is gradually becoming a regular part of the property/casualty industry, but its use is far from ubiquitous yet.
Allstate, one of the early adopters, created a standalone unit for its telematics business in 2016. Allstate is the largest publicly traded U.S. provider of home and auto insurance.
Also in 2016, The Generali Group and Progressive Group of Insurance Companies—both leaders in car insurance telematics— sealed a research and development deal to improve their individual data analytics capabilities and develop new producdts.
The number of live telematics policies in the U.K. surpassed 750,000 for the first time in 2016, the British Insurance Brokers Association found in January.
Source: Cambridge Mobile Telematics