Published on March 21st, 2023
Businesses can use better strategies to give outstanding customer service if they have a full picture of their customers. Telematics is a key component in the insurance industry. The insurance company follows the same approach of being able to get to know its customers in depth. If your startup or business operates in the insurance sector then Telematics can allow you to enhance the customer experience and increase your client base.
To find out how you can improve your insurance telematics game and how telematics may benefit both you and your clients; Read this article until the end.
How Telematics Insurance Works
In the past, the car’s model was taken into consideration in calculating the amount of your insurance policy. Therefore, if two people have the same car model, make, and have the same insurance policy, their costs will likely be similar. But what happens if one of the drivers is more secure? Do they have to continue paying the same amount of premiums? This is where usage-based automobile insurance comes in.
Telematics devices are connected to vehicles to monitor the risks they pose, and the insurance industry has embraced this idea in the form of “Usage Based Insurance.” Telematics devices record the habits of driving of owners, which include the average daily mileage, average speed, and the degree of safety of the vehicle’s operation.
These records are later used to calculate the specific motor insurance costs depending on the risk attached to every vehicle. For example, a car’s insurance premium will be more when it is operated at high speeds on the highways as opposed to if it is driven at a moderate speed within the city.
Telematics can increase the affordability of those who drive less and follow safe driving habits, assuring that customers of auto insurance are paying a fair amount. Furthermore, it assists insurance companies in accurately calculating accidents and reduces the number of fraudulent claims.
What is the best way for businesses to implement telematics technology?
According to Allied Market Research, the Telematics insurance market is expanding to $13.78 billion by 2030, at an annual rate of 19.5 percent.
Usage reports aren’t required under UBI. The system is automated. The majority of the time, drivers do not need to notify their insurance company of any relevant information regarding their driving. The insurance company will monitor its customers’ driving habits and make reports using a variety of methods. Numerous possibilities are accessible due to the advancements in technology.Â
Here are just some examples:
1. Mobile App
A company that provides insurance could ask the driver to download a specific application and agree to certain privacy limitations for monitoring their movements and the movements of their vehicle. Be aware of the cost to create an insurance app that can be downloaded on demand.
2. Connect-in Device
Similar to how the pen drive can be connected to a laptop, the same piece of equipment can be connected to a car to track.
3. GPS Devices
Advanced GPS units monitor the user’s movements and provide insurance companies with vital driving information.
4. Onboard Sensors
The vehicle might have sensors on board that can save and transmit information related to the vehicle in real time or later.
5. Mileage (Miles) detection
In this instance, the function of the implanted device is to track and transmit how long the vehicle was driving. The distance is what determines the cost of insurance.
Example of Telematics Insurance in Business
On weekends, Mr. A makes use of his vehicle to travel around the city. He is aware of speed limits and is a competent driver and has plenty of experience behind the steering wheel.Â
Now, Mr. B. is a new driver still learning to drive. He drives his car during the week but often brakes and accelerates quickly.
Mr. A is likely to pay a lower cost because he is a safe driver and doesn’t use his vehicle often which reduces the chances of him filing claims. However, Mr. B is not experienced or reckless when driving and frequently uses his vehicle which increases the chance of a car accident and consequently, a claim.
The information provided by telematics can help insurance companies make the right amount of premiums to offer their clients. It also helps customers track their driving habits.
For you to see a concrete example of an insurance firm making use of telematics is Progressive Corporation. The company offers substantial savings on insurance premiums for automobiles to customers according to their details about driving habits that are gathered by the telematics software called, Snapshot.
Applications of Telematics Insurance
Telematics insurance can be used for many applications within the insurance of automobiles. Telematics insurance used for purposes can benefit the insurer and the insured. Let’s take a look at some of the most important benefits of telematics for insurance:
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Reporting crash information
Reports can provide owners of insurance companies and car owners with necessary information on what led to an accident.
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Tracking of the trailer
The tracking of a trailer is a system that utilizes the location unit that is attached to the trailer that tracks the movement and location of the unit of the trailer on an articulated automobile.
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GPS anti-theft devices
GPS tracking devices are accepted as standard and mandated by motor insurers on top-of-the-line automobiles which helps to stop vehicle thefts.
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Help in research
Floating data from cars can provide motor insurers with valuable data on driving habits that they can utilize to improve their insurance models to calculate premiums.
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Prevention of fraud
Telematics in vehicles can assist in identifying fraudulent attempts and provide a reason for the mystery of disappearing cars.
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Lowers insurance costs for drivers with high risk
Since they’re involved in accidents more often than other drivers; male drivers between 18-25 pay premiums that are several times greater. They could reduce their insurance expenses by installing a telematics system which proves that they are more careful than average drivers.
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Improved risk control for companies
Modern car telematics solutions offer data that provides insurance agencies and their agents instruments to determine fleet operators who adhere to high standards for safety in traffic.
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Security communications wireless for cars
This is a telematics system that allows for an exchange of security information on things like dangers on the road, and the position and speed of cars and other vehicles, among others.
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Cold storage cargo
To activate alarms and track transactions, cold storage trailers are increasingly incorporating Telematics systems to record time-series data regarding the temperature within the container. Telematics systems can ensure that the temperature during the cargo remains within safe food standards. This can be accomplished by using an ever-growing variety of sensors that rely on RFID technology.
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Emergency warning systems for vehicles
Warning systems for emergency vehicles, “Intelligent vehicles” are outfitted with the technology to transfer (or weave) warning signals with other vehicles in the vicinity of travel, between vehicles, and even infrastructure.
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Navigation satellites
These are a GPS and an electronic mapping system that allows a driver to locate their destination and plan their journey and map out the route.
These diverse and exciting applications and the use of telematics within the insurance industry make it the next frontier in technology for your company!
Benefits of Using Telematics Technology in the Insurance Industry
There must be a total understanding of the different uses of telematics for the insurance industry. Let’s examine a few specific ways that insurers can make use of these applications to their advantage.
1. Customer Engagement
If you can better understand your customers they can be classified more efficiently and supply them with customized insurance plans that are suited to their requirements. It is essential to tailor your products to provide extraordinary customer engagement and experiences. Data analysis can be utilized to build a full view of the customer which is crucial for personalized services.
In addition, telematics systems often lead to ongoing interaction between clients with the company through apps or other devices that monitor their use. Point scoring and rewards are two elements of gamification that draw attention and deter reckless driving. A high level of interaction with customers increases the chance that they’ll be happy with the experience and willing to pay more.
2. Keep Insurers Ahead of the Competition
What are the advantages of an insurance plan that pays customers to drive more safely, while using what they currently have? It’s a useful and concrete reason to adhere to traffic laws. It’s a method that reduces insurance costs for those who are the safest on the road. In addition, it allows insurance companies to recognize drivers who are a danger to others on the road, allowing them to increase their client’s rates while decreasing the premiums of safe drivers.
At the final stage, insurance companies could come up with better rates and prices due to mobile telematics and the vast knowledge gained from mobile data analytics. This gives an edge over other auto insurance companies. Insurance companies that are part of UBI projects can also assess how their pricing structure could change and evolve in the future, due to the gathering of numerous information.
3. Lead to Reduced Costs for Organizations
More insurance companies are utilizing their customers’ smartphones to make technological advancements in telematics. Because the majority of people carry their smartphones in their pockets They have become an important tool for insurance companies since there are sensors for monitoring things such as travel distance, speed, or other information about the driver’s identity, for example, whether the driver is at the wheel or the age of the driver. So, an app for smartphones is the cheapest option to set up insurance based on usage.
Safe drivers reduce the expense of claims, which makes insurance more profitable. In addition, insurance that is based on usage to promote responsible drivers will attract less risky customers. Drivers who have an accident history or speeding tickets are not likely to sign up for a usage-based insurance plan.
The risk of claims being reduced can be mitigated through better behavior and positive selection. Data enrichment can help insurers identify issues early and inform services. The service then makes more precise decisions about liability in a way that is based on time or location information. Additionally, a First Notification of Loss (FNOL) permits the insurer to handle claims in a matter of minutes rather than over several days.
4. Makes Organizations Perceived as Tech-Friendly
Imagine that a car insurance company provides an insurance option for mobile phones but still serves the majority of its other customers with the traditional insurance method. A small but substantial portion of its customers has enrolled in the mobile-based service after a few years. This could be due to the company hasn’t had the time to advertise its UBI service efficiently. Does the idea of using usage-based insurance an utter failure?
It’s not, and for a crucial reason: it displays to the customers that their insurance company is always innovating and creating new concepts and insurance plans that will assist their customers, including those who (at the moment) decide not to take advantage of this mobile UBI model. If a customer is deciding that mobile-based telematics aren’t an option for them now it is possible to be influenced to change their mind shortly. They’ll also be delighted with their insurance company’s new method of expanding its line of products.
There are, of course, benefits to telematics in the insurance industry, particularly for clients who enroll in the mobile telematics program. They can expect a reduction in their insurance premiums for good driving habits which can make them think that their insurance company is truly concerned about compensating the driver for their safe driving. An attentive driver is less likely to break ties with their insurance provider to take advantage of an alternative auto insurance company since the relationship between the insurance provider and the customer will be closer and more individual.
Impact of Telematics Insurance on Other Insurance Sectors
At present, the other insurance markets don’t use UBI-based policies (UBI) similar to the way the auto industry does. But, it won’t be too long before health insurance companies, life insurance companies, as well as home insurance companies begin using at least a portion using telematics-based data, or telematics-based insurance statistics. Let’s look at how telematics and the insurance industry merge:
1. Telematics Health Insurance
Health insurers have enjoyed benefiting from the digitization of the insurance industry. They have relied on data to evaluate the risks associated with providing insurance to each customer. Even the most basic decisions health insurance providers make, such as the decision to provide coverage to an individual typically involve data. People who apply for coverage are typically assessed by companies within the health insurance industry including important information like age and medical history, smoking or non-smoking status, and many other variables used to decide on the price and whether or not to refuse coverage.
Insurance companies for health can gather the same data from fitness monitors using the use of telematics technology. Then, telematics-related insurance businesses can use this information to offer reward programs based on activities or discount offers to new applicants to insurance who wish to divulge such information. Other health-related parameters may be paired with other health-related data, such as elevation gains, distance traveled as well as active hours.
2. Telematics Life Insurance
Telematics technology can tailor life insurance plans to provide higher-quality rates. The company can utilize tracking systems to collect data about the behavior of clients and create specific offers for them.
You can discover more about an individual’s level of activity in addition to other factors through the collection of data via wearables and even ingestible. It is possible to assess how risky it could be for your company to cover the individual in the event of a risk. The guesswork could be eliminated with the use of telematics-based health insurance as well as life insurance.
In this sense, the challenges businesses could encounter are related to the use of devices by users or data processing. What can companies do to overcome these challenges? Who is there to help them?
3. Telematics in Home Insurance
Telematics may be an interesting option for companies working that deal in home insurance. The underwriting process can be made simpler when you have reliable details about what’s going on inside the property you plan to insure.
Smart home appliances are crucial in this scenario since they can provide data on how well the house is kept in good order such things as monitoring the condition of the electrical system. The homeowner may be eligible to receive a reduced premium if he is regularly repairing damaged HVAC systems or maintaining the stove in top state.
The technology also informs homeowners and insurance companies when maintenance is required and also monitors how secure the home is. Thus, the risk of insurance-related incidents and subsequent claims is naturally reduced.
Alongside house insurance, telematics can be crucial to protecting a home from theft, fire, as well as natural disasters. Companies that own commercial property, which includes merchants, manufacturers as well as a range of other organizations, may decide to insure the property to minimize the risk.
Telematics technology is playing an identical function. It can continuously collect data on the condition of the property’s alarms for fire as well as water leak detection devices and other security-related equipment. In real-time, warnings can help insurance companies know how risky it is to protect a particular property as well as let them know beforehand the time when claims are likely to arise.
Telecommunications Challenges
Telematic devices record data in real-time and allow insurers to make use of this data to find out more about the driving habits of a customer. Because telematics systems must be fitted into cars or retrofitted into vehicles, data must be collected, which poses privacy issues.
Before data can be assessed on a larger scale to generate useful insights, it often requires sharing with different parties. The new data stream created from telematics systems makes it more complicated if an insurance company is looking to join or participate. An effective insurance platform can manage data streams and collaborate.
Important Article: 5 Challenges and Principles to Digital Transformation in Business
How iTechnolabs can benefit your insurance company by implementing the use of telematics?
Although telematics technology is primarily popular in the insurance sector for autos, however, there is plenty of space for this technology to be utilized in other sectors. Thus, these innovative technology solutions for telematics may be the ideal next stage in the development of your company, no matter the industry you are in. If you’re looking to have the development of a telematics program contact iTechnolabs.
iTechnolabs is a company that develops custom-designed software firm which provides customized Telematics insurance-related software solutions to insurance companies to aid them in keeping an eye on the driving behavior and other data required to provide better insurance services for their customers. Our solutions will help you gain new customers by offering them affordable insurance rates and other benefits like safe driving advice trips, trip details trip logs, trip details, and many more.
Contact us to talk with one of our specialists about your needs regarding telematics in the insurance industry.
