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As the insurance market becomes further saturated, and insurers continue to look for every possible value-add available, the role of innovative and market-leading technology is central to any business strategy. With this in mind, it’s worth exploring the ways in which telematics has impacted the industry, and the importance of this technology for insurers.
When referring to telematics, we can best summarize the technology as the use of wireless devices to transmit real-time vehicle telemetry data back to a central organisation. The data recorded in telematics devices can be used to develop more accurate pricing, accident prevention, reduce losses and associated adjudication costs by enabling more streamlined and accurate claims assessments.
A recent report from ABI Research found that the number of drivers monitored by telematics is expected to reach 89 million globally by 2017. When you consider that in 2010 only 1.85 million were using this platform, this is a drastic increase. Telematics is having a considerable impact on the motor industry, and some insurers even have niche markets based solely on the idea that customers could reduce their premiums by having a recorder installed in their vehicle.
Real-Time Analytics and Claims
The continued advancement of real-time analytics has had a considerable impact on how insurers do business, as well as creating fairer and more accurate policies for end users. This is an opportunity insurers have woken up to, and are increasingly aware of.
Telematics can be particularly advantageous when it comes to managing claims. By providing important and rich data about the vehicle at the time of an accident, it assists in defending claims and minimizing their cost. This also reduces the amount of time and resources insurers must often dedicate to investigating claims and dealing with disputes from customers. Essentially, telematics can help to reduce the “gray area” that is often a cause of disputes during the claims process.
In principle, another of the most cost-saving contributions comes from the ability to reduce the claims adjudication time. If the insurance carrier fails to resolve the claim within the initial review period, expenses will frequently rise due to legal costs, and an increase in the likelihood of false or exaggerated claims.
This of course links directly to another key issue for insurers; fraud. The effective use of telematics technology provides insurers with an invaluable tool in fraud prevention, through the monitoring of accident data in real-time. Again, this provides an incredibly in-depth snapshot of any accident, and reduces the gray area that is often left to interpretation during the claims process, whether due to confusion or deliberate and planned fraud.
Similarly, the use of such technology is a central part of the digital transformation of insurance propositions, and is a point of differentiation for some insurers. By enabling policy-holders to use a single device, which plugs directly into their vehicle, and will inform them of all performance-related analytics and other cloud-based information, insurers can position themselves ahead of their rivals, some of whom are yet to adopt such innovations.
Driver Behavior Profiling
Similarly, the ability of telematics to monitor and analyze driver behavior profiling is becoming an attractive proposition, because it offers insurers the ability to review driver risk and reduce it with training and wider support. From the perspective of both insurers and the insured, improving driver safety and reducing accident rates is always a top priority, due to both the financial consequences and the overall duty of care for employees and policy holders.
The effective use of this continually evolving technology will prove a considerable differentiator in the coming years, and can ultimately win and keep customers. There are clear forecasts for the number of vehicles that are likely to be using such technology in the coming years, which presents an excellent opportunity for insurers.