Start building customer relationships with usage-based insurance

Customer behavior changed in many different ways in the last 10 years, they have higher expectations of goods and services and are not afraid to show it. When it comes to motor insurance, many consumers are demanding the same personalization, relevance, and fairness that they now take for granted with other products.

Also, they are aware of the value of their data and, within reason, they’re willing to share it.. Increasingly, they expect the businesses they interact with to know them, act on the data they share, and deliver value and benefit in return.

Embracing real engagement

Motor insurers must recognize, when it comes to driving apps, the tacting of offering and waiting doesn’t apply. The potency of smartphone telematics lies in inconsistent usage. The more a driver records their journeys, the more data is created, leading to a more complete, and thus accurate, picture of drivers’ lives. But we can’t rely on our customers to do this for us. It’s incumbent on insurers to shift from an annual communication with policyholders to regular, ongoing dialogue to nurture and influence their behavior.

This means creating incentives for regular driving recording. 

For some segments, motivation manifests as discounts – the more miles you record or the more days you use the telematics app, the greater the saving at stake. 

For others, it might involve a gamification approach, offering rewards of both a monetary and non-monetary nature to encourage consistent usage. When you understand your target customers intimately, you can identify the levers that will work for different groups. 

You shouldn’t be fooled into thinking that smartphone telematics offers merely young-driver or millennial-centric appeal. Older or more affluent drivers at the premium end of the car market are just as motivated to reduce their insurance costs as younger drivers typically penalized for their lack of motoring experience and a higher propensity for claims.

Make no mistake, this requires a very real step up in effort on the part of the insurer, but ever-advancing automation and algorithms are helping to lighten the load.

Risk reduction and loyalty increase

Moreover, this isn’t a source-intensive effort that simply adds cost and reduces revenue; deploying smart technologies requires an incremental investment that delivers a return on two of an insurer’s primary commercial goals – risk reduction and increased loyalty

Reducing risk leads to reduced claims, leading to reduced costs for insurers. When the app spot triggers, characteristics, or patterns of behavior associated with greater risk, you can intervene. This can be informative and educational to the driver and an effort to reinforce positive behaviors. 

Meanwhile, increased loyalty stems from the benefits you offer members of your driving community. Rewards can be as simple as points that can be exchanged for something relevant to a customer’s life, such as a free coffee or a voucher for dinner with a partner, to something more out of reach, such as driving experiences in an aspirational car for the weekend.

Understand your customers

Without a doubt, the single biggest benefit of smartphone telematics is the ability to get to know your customers; who they really are, not what aggregated statistics infer, the role of a car and transport in their life, and opportunities to add value to this. 

And the end-goal isn’t for this insight to languish in internal presentations and meeting rooms. It’s primed to help insurers to identify real segments of customers and to meet them on their terms, with what they need today or don’t even know that they need tomorrow.

This certainly drives more relevant marketing messages, but it has the potential to go so much further. It offers insurers the opportunity to identify latent needs and create new products and services based on a truth about drivers that traditional market research couldn’t get close to. 

It identifies opportunities to build an ecosystem with partners beyond the world of motor insurance to add wider value to a customer’s life, becoming “stickier” in the process and reducing the likelihood of price-driven defection.

Case in point

Our Partner Triglav is a major Slovenian insurer that launched Slovenia’s first usage-based insurance proposition based on smartphone telematics. Hailed as Europe’s most innovative insurance program in 2018, the firm went beyond the black box and invested in transforming the concept of customer engagement in motor insurance. 

They launched a smartphone app with user interface and user experience at the forefront of their thinking. Discount incentives combined with a wider portfolio of motivational and gamification techniques ensure their technology becomes an indispensable part of their customer’s lives. 

They adopted a marketing dialogue with their customers less akin to an insurer and more like the entertainment and retail brands so prominent in the daily lives of their audience. All that while taking their data responsibilities seriously and acting transparently. 

The result?

Beyond industry acclaim, Triglav captured 10 percent of the driving population within 24 months of launching. To put this into perspective, consider Italy, one of the most advanced markets for telematics with a 20-year history of embracing the technology. The proportion of drivers using telematics is at 15 percent. Or the UK, with a roughly ten-year history of telematics, boasting 4 to 5 percent of the driving population adopting the technology. The numbers speak for themselves. Redefine customer engagement and the commercial return can be potent.

Start with strategy

We believe smartphone telematics offers the unrivaled potential for an industry that’s ripe for change. But in closing, we’d urge any insurer assessing the role of technology in risk and customer propositions to ensure they’re starting on the right foot. Too often, motor insurers find a technology then develop a strategy. 

More insights