When you think about all the forces shaping the auto industry today, insurtech may not be at the top of your list. But its impact on ratings and claims on auto insurers, and how it’s challenging them to grow their personal and commercial lines of business with creative solutions should make you take another look.
And it isn’t going away. According the research and consulting firm Strategy Meets Action, the number of insurtech companies doubled in 2017. McKinsey adds that connectivity, electrification, autonomous driving, and shared mobility will fuel growth and “change the rules of the mobility sector, and lead to a shift from traditional to disruptive technologies and innovative business models.”
For example, shared mobility will force auto insurers to rethink their practice of calculating premiums based on restricted rating classifications – such as vehicle type, single owner-operator, driver age, gender, credit score, occupation, and driving record. With shared mobility, insuring the driver – in addition to the car – becomes paramount. So it’s critical for insurers to find ways to track and profile an individual’s driving behavior.
Enter the power of mobile telematics, a new segment of insurtech, which can provide auto insurers with a detailed look at their customers’ driving behaviors. They get data on what they’re doing behind the wheel – speeding, harsh braking, fast acceleration, mileage, time of trips, and more. But, because it’s mobile, they also get data on what drivers are doing on their phones – making phone calls, texting, and using apps – so they can create a holistic picture of their customers’ true driving behaviors.
It’s no surprise, then, that the most innovative auto insurers are already investigating or implementing strategies that incorporate mobile telematics to modernize their offerings. Insurers can use this data to improve customer engagement, drive more accurate pricing, and provide a proactive feedback loop for safe driving.
For example, Nationwide leverages its partnership with TrueMotion to obtain distracted driving data from members of its UBI program, SmartRide. By tracking the frequency and types of distracted driving among its policyholders, Nationwide can improve its future loss estimates while coaching their customers to be safer behind the wheel.
Insures can even use these new streams of smartphone data to develop actuarial models based on individual vs. class, as well as segment data. The result? The ability to dynamically price premiums according to actual observed driving behavior, addressing the mounting pressure to grow the business in the face of disruptive competitors.
For both personal and commercial lines insurers, embarking on a UBI path and utilizing insurtech’s game-changing innovations – like mobile telematics – should be an essential strategy for any insurance carrier looking to stay ahead of the competition and remain relevant in a data-driven world.