How Insurers Can Get More Value from Telematics Data

There is a universal truth when it comes to telematics – they are only powerful if you do something with the information they provide. Certainly, this applies at the fleet level. It also applies to (re)insurers and MGAs.

Telematics presents the opportunity to realize superior outcomes in risk selection, underwriting, and pricing / terms. Yet many insurers are behind the curve in capturing these underwriting advantages.

If you are an insurer not yet taking full advantage of telematic capabilities, settling on a starting point can be daunting. While it can be tempting to start with more complex endeavors, like developing rates for a usage-based offering, we believe that you will realize greater value and do so more quickly by starting with higher-level risk information that is already readily available.

Your insureds, their agents / brokers, and / or their telematic service providers (TSPs) can easily share summary information that can be highly useful in assessing risk and exposure.

Exposure Part 1

Most TSPs embed summary reporting that provides verified insight on key underwriting factors, such as:

• Where? – Rural vs. Congested Urban? Challenging Jurisdictions? Garaging Locations?
• How Much? – Local vs. Intermediate vs. Long? Total Mileage?
• When? – How many hours per day are vehicles on the road? Rush Hour vs. Mid-Day vs. Middle of the Night?

Exposure Part 2

With an understanding of where and when an insured is driving, the next step is to determine how the insured is driving. With the array of metrics that telematics can provide, it can again be difficult to determine where to start. Hard Braking? Distracted? Speed? Hard Cornering?

As discussed in one of our previous posts, there are pitfalls in using some of the traditional and popular context-dependent benchmarks, such as hard braking, to assess behavior and risk.

We focus on speeding over the posted speed limit, as it is not subject to the technical and variable-driven challenges associated with other metrics. Importantly, speeding reduction is intuitive to the drivers themselves, and speeding reduction is also highly correlated with improvements in other concerning driver behaviors.

We also find that focusing on patterns more than individual instances produces more significant and more rapid improvements. The efficacy of pattern tracking also carries a significant underwriting advantage – granular data is not required to assess relative risk. Strong conclusions can be drawn from summary-level information. Understanding this, underwriters can request fleet-wide speeding data that will enhance their ability to assess and price the risk on an account. Again, presuming the insured is using a reputable TSP, this information should be readily available.

Exposure Part 3

Leveraging telematic data in the underwriting process has a further, and often underappreciated, benefit. With the increasing proliferation of telematics – either third-party provided or in-built at the time of vehicle manufacture – plaintiff attorneys commonly seek access to telematic data in discovery. If the insured has been actively using the data to improve driving behavior, it can serve as a powerful defense in a claim scenario. However, if the data shows unaddressed risky driving, it can be damning evidence against the insured.

Requesting telematic information enables an underwriter to assess whether an insured is taking action to address known (or presumed known) risk or putting a bow on problems for a plaintiff attorney.

Momentum

Your company may already be far down the track with telematics. However, if your company is like many other insurers and just beginning with telematics, the above may help you to plot your course to rapid benefit realization.

Incorporating even simple telematics summaries into the underwriting process elevates profits by:

• Affording a more accurate view of actual exposure (which can also elevate trust with agents and policyholders)
• Improving risk selection capabilities
• Enabling better matching of premium to risk level
• Creating opportunity to intervene and alter driving behavior prior to actual claims

You will likely find that starting simply and focusing on exposure insights and behavior patterns builds the momentum needed for more advanced telematics programs in the future.