These days, the hype and hyperbole surrounding anything involving the word “digital” are almost overwhelming. Everything will change the game. Everything will disrupt. Everything will reshape and transform industries and fortunes. But too much of the narrative in our daily diet of business thinking is about the tech. Sure, it’s important and often impressive, but we’re at risk of losing sight of what really matters: the relationship between our businesses and our customers.
Let’s start with the customers
Customers are behaving differently today than yesterday. And few of us know what might change again tomorrow. Their expectations have surged in tandem with their empowerment and businesses are struggling to keep up. When it comes to motor insurance, many consumers are demanding the same personalization, relevance, and fairness that they now take for granted with their retailers of choice, their taxis of choice and their entertainment of choice. I may drive a BMW, but I’m not the same as every BMW driver. I may be a newly licensed graduate, but I don’t use my car in the same way as every other graduate.
I may live in an urban city center, but my car usage isn’t the same as everyone else in my postcode. Consumers know the value of their data and, within reason, they’re willing to share it. Thanks to the smartphone and the advent of countless digital-first companies across countless industries, they know the art of the possible. 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
When it comes to today’s digital world, we’ve long since dismissed the idea of “build it and they will come”. Motor insurers must also recognize, when it comes to driving apps, “offer it and they’ll use it” doesn’t really apply. The potency of smartphone telematics lies 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 a regular recording of driving. For some segments, motivation manifests as tiered 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 we understand our target customers intimately, we can identify the levers that will work for different groups. And we shouldn’t be fooled into thinking that smartphone telematics offers merely young-driver or millennial-centric appeal. We’ve seen multiple instances around the world where 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. Moreover, we don’t see this as a source-intensive effort that simply adds cost and reduces revenue; rather deploying smart technologies requires an incremental investment that delivers a return on two of an insurer’s primary commercial goals of risk reduction and increased loyalty. Reducing risk leads to reduced claims, leading to reduced costs for insurers. When our apps spot triggers, characteristics or patterns of behavior associated with greater risk, we have the ability to intervene. This can be informative and education-focused or an effort to reinforce positive behaviors and the benefits to the driver or can involve penalties or fines for repeated breaches of good driving behavior. Meanwhile, increased loyalty stems from the benefits we offer good members of our 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.
Truly knowing our customers
Without 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 messaging, 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, 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. They combined discount incentives with a wider portfolio of motivational and gamification techniques to ensure their technology became an indispensable part of their drivers’ 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. They took their data responsibilities seriously and acted 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. This needs to change. The strategy has to come first: who we want to serve and why. The right technology and the results will follow.
Find more valuable insights on how motor insurers must adapt to meet customer expectations in Raconteur’s special report, “Tech Revolution in Auto“, published in association with Amodo.