It isn’t a stretch to say the connected car is going to change auto insurance. It will usher in an era where insurers will easily be able to know how their policyholders actually drive. They’ll get powerful behavioral data on how often their drivers slam on the brakes, accelerate too quickly, and speed. They’ll see their customers’ daily habits, like their most frequently visited locations, when they drive, and where they typically park.
Insurers will be able to use this data to better assess risk and provide more aggressive pricing for the best drivers, and more accurate pricing overall, which will help combat adverse selection. They’ll be able to send customers tips on how to drive safer and alert them about dangerous driving conditions in real-time, creating stronger relationships while reducing loss costs. They’ll be able to create rewards programs based on driving behavior, providing incentives for safer driving like discounts on gas, roadside assistance, shopping, and entertainment, increasing engagement, brand loyalty, and, ultimately, renewal rates.
Connected cars will also disrupt the claims process. Today, carriers have started to figure out the backend of the claims process, spending hundreds of millions to build out systems for automating the appraisal, negotiation, and recovery phases. But in most cases, carriers still need thousands of agents for claims information gathering, which increases costs and takes precious time away from consumers. When a connected car gets into an accident, insurers will know the point of impact, the speed at impact, the time of day, location, weather, traffic conditions, and will be able to see if their customer drove away from the crash scene or was hauled off by a tow truck. All automatically.
It’s going to be a beautiful world. Too bad it isn’t happening anytime soon. Due to the diversity of OEM standards, their control over the driving data, and the length of fleet turnover (11.6 years in the US), connected cars aren’t projected to break 50% of the US fleet for another decade.
What can insurers do today to get this data? Make sure to sign up for our webinar to find out. In the meantime, stay tuned for part two of our series next week: The Connected Car is Here. It Just Isn’t a Car.