Insurance Telematics Basics

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Learn the basics of insurance telematics

What is insurance telematics?

Insurance telematics is the practice of collecting driver and vehicle behavior, analyzing that data, and using it to improve insurer business outcomes. This data can be used to improve policyholder risk modeling, reduce costs, and better attract and retain policyholders.

Telematics sits at the intersection of telecommunications and informatics, using vehicle data and GPS to understand driver performance.

 

How can insurance telematics help your organization?

Improve risk modeling


Insurers have traditionally used proxies such as credit history, age, and location to estimate policyholder risk. Telematics allows the insurer to determine the true risk of a policyholder by providing accurate data on actual driving behavior. More accurate risk modeling benefits the policyholder through lower premiums and insurers through a less risky business mix.

Reduce costs


Insurance telematics programs have a direct impact on an insurer’s costs. Telematics has been shown to reduce claims costs through lower claims frequency and severity, fraud avoidance, and process improvement. A risk pool with more safe drivers, who self-select into telematics programs, also helps reduce costs.

Attract and retain customers

Your policyholders care about three things when it comes to auto insurance: paying the lowest possible price, peace-of-mind, and good customer and claims service. Insurance telematics effectively addresses these three major policyholder decision criteria. Offering a telematics-driven usage-based insurance program can help you pull policyholders away from competitors through more competitive pricing and, once acquired, make them more likely to stay. Positive customer experiences through a more efficient claims process will similarly help you retain policyholders.

Telematics leads to*

  • 15-20% improvement in insurers’ combined ratio1
  • 50% fewer claims2
  • 10% increase in policyholders’ likelihood of renewing their policy 3
  • 11% increase in customers’ likelihood of recommending their insurer 4

*For telematics policies

The State of Insurance Telematics:
Challenges, Opportunities, Adoption, and ROI

This white paper explores the current state of insurance telematics adoption in the United States. We focus on the challenges insurers face, both internally and externally, in getting a telematics program to market and provide information on the benefits derived from implementation.

Read this white paper to help build the business case for insurance telematics.

Read the White Paper