Insurance Telematics Basics
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.
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.
The State of
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.
Insurers have embraced telematics as a tool to more effectively price risk. Leveraging telematics to improve the claims process is the next logical step. This guide provides an end-to-end exploration of how telematics can impact the entire auto insurance claims process.