The Connected Car: Common Ground for Insurers and the Insured

Many emerging technologies are already starting to reshape automotive insurance on a large scale. One such technology, automotive telematics, can provide drivers with broad-ranging benefits, from vehicle diagnostic information to convenience- and safety-related offerings. It will be an explosion of telematics and related services that make the connected car a part of our daily lives, once the technology moves past the “early adopter” stage and becomes the standard feature demanded by consumers.

The first installment of this series discussed some of the benefits insurers can realize from widespread and intelligent implementation of telematics systems, namely in the form of cost-savings and innovative new business models. However, insurers who recognize and champion this emerging technology will also be better prepared to serve their customers by offering faster response times and more comprehensive services.

Consider just some of the possibilities:

• More accurate underwriting criteria – Because telematics devices can be used to monitor vehicle mileage, motorists who opt-in for the telematics devices will be charged for how much they actually drive; low-mileage drivers are rewarded for spending less time on the road. They also can realize savings based on where and when they drive.

• Improved risk models – Consumers will care if insurers reward their good habits – and keep them safer from more egregious drivers in the long run. With telematics, insurers will be able to finely tune risk models by carefully parsing driving characteristics. Which customers appear to exhibit aggressive or careless behavior on the road? Who has sudden starts and stops, drives at high speeds or exhibits reckless cornering? These consumers can be educated about their habits and urged to curb risky behavior.

• Faster roadside and emergency response – Using onboard telematics, first responders can be notified almost immediately following an accident with precise location information for a speedy response. Telematics systems can also collect and transmit data about the force of an accident, distinguishing between one likely to involve only vehicle damage and one likely to involve traumatic injury to the driver or passengers. This enables prompt dispatch of the appropriate level of service – for instance, a tow truck versus an ambulance. Not only can accident location and data help save lives, but they potentially help reduce the severity of the situation with faster, more efficient response times. This, in turn, can mean increased savings within the realm of insurance due to the reduced need for extended trauma care.

• Shorter claims cycles – No one wants to have an accident, but they do happen. That’s why drivers carry insurance in the first place. When there is an incident that requires a customer to file a claim, they want to be reimbursed as quickly as possible. Through the increased efficiencies created by telematics reporting, the claims cycle speeds up – which pleases customers, decreases investigation expenses for insurers, and cuts down on claims processing costs overall.

• Potential for up-sell and convenience – Insurers seeking to distinguish themselves from competitors can offer enhanced customer services through telematics. Auxiliary services such as GPS navigation, vehicle location or enhanced roadside assistance could be part of a branded offering for insurance customers who opt-in for telematics devices.

Perhaps most conveniently, insurance customers needn’t necessarily have much technological savvy to successfully install and use telematics systems. While early (and many current) telematics systems were factory-installed on new vehicles, aftermarket telematics units are on the horizon. Some will be “plug-and-play” with installation as simple as connecting the unit through the vehicle’s On-board Diagnostics (OBD-II) port and then activating it online. This type of connection also enables telematics systems to be implemented in a wide variety of vehicles – every car sold in the United States since 1996.

Insurance companies who invest in telematics now can take advantage of the early-adoption curve and get a jump on their competition. They will be better equipped now to segment their markets and develop unique offerings for new and existing customers.

About the author: Fred Blumer is Vice President of Aftermarket and Data Services for Hughes Telematics, Inc. (HTI). The company offers a portfolio of location-based services for consumers, manufacturers, fleets and dealers through two-way wireless connectivity. Additional information about HTI can be found at www.hughestelematics.com.