Insurance Telematics Europe 2015 – Day Two Blog

A Consumer Intelligence survey of 2,000 consumers found that only 3 percent of those surveyed currently had a telematics solution in their cars, and most of them were young drivers. In addition, a whopping 53 percent said that the solution will never catch on.

“There’s a bit of work to be done,” Ratcliffe said. “Consumers are still wary.”

In addition, as more and more players in the UBI space are looking to reduce the product’s reliance on discounts, in favor of providing value-added services to increase market penetration, the majority of respondents in her survey were of a different opinion. Or, as Ratcliffe put it, “It’s about money.”

Nearly two of three people in the survey said they want premium reductions. A slightly smaller percentage want refunds for safe driving, and more than one of two said they want price reductions for efficient driving.

But Ratcliffe’s message was not all gloom and doom for UBI. Her survey results also showed that, if the UBI product has not yet entered the market mainstream, knowledge of the solution has, with a whopping 71 percent of respondents saying they are aware of telematics. The survey also revealed potential for growth in market segments perhaps not yet sufficiently exploited by insurers.

For example, she suggested offering a UBI package of services for older drivers that would include alerts for breakdowns and if the car is stolen and providing a professionally fitted device. But it would not include driver ratings or feedback.

“They want to look after their own data,” Ratcliffe said. “They don’t want to share it.”

On the other hand, the survey suggested that there was more to reap in the young driver segment through value-added services. Using data from the survey, she suggested a package that includes a smartphone app and alerts if the car is stolen and when it needs repairs. As opposed to their elders, younger drivers are happy to share their data, “but they don’t want to feel like they are being spied upon and they don’t want to be reported if they do something wrong.”

Nevertheless, Ratcliffe advised, “This Generation Y, if I were in your shoes, they are who I’d be going for.”

She was followed by an eye-opening presentation which suggested that perhaps neither upfront discounts nor value-added services would move UBI from niche to mainstream. Rather, as suggested on day one of the conference, by Josep Celaya, chief innovation officer at MAPFRE, the “killer app” would be the OEMs offering an embedded insurance telematics solution. Or, as Celaya had put it: “The only way to make [UBI] mainstream is for the manufacturers to embed the solution in their cars.”

This is exactly what the auto partnership Renault-Nissan has done. Martin Otter, consultant, New Business Development, at Nissan, told the conference that the data collected by Renault-Nissan vehicles equipped with the R-Link system is “fairly standard. . . We summarize journeys, trips in terms of duration and in terms of distance. Within the trip, we capture data points at various frequencies, whether we have speed, heading, position and so forth. And various big events that occur within the journey can be reported out as they occur.”

The data from the journey is uploaded at the end of the trip. If a driver takes four trips a day, there will be four sets of data. This data is available to any insurer who contracts with the owner of a Renault-Nissan car equipped with the R-Link technology. “So to combine the TCU2 with our multimedia system allows us not only to capture and control the vehicle remotely, but also to capture the data you might need.”

The data is sent to Renault-Nissan’s European-based data center from where it can be provided to insurance partners or anyone else under contract with Renault-Nissan. “We have two approaches,” Otter explained. “The first is, the insurer under its own brand accesses the data of customers who happen to drive one of our cars. We are obviously concerned that we have the right relationship commercially and the protection of the consumer’s data is being managed properly.”

The second approach is that Renault-Nissan “is exploring” its own branded insurance proposition, he went on. “The insurance proposition adds value to our customer relationship,” Otter said.

The opportunity is “huge” for Nissan, he noted. “Our target is for every vehicle coming off the production line to have connected capability. So we’re looking at about 20 million vehicles being connected by 2020 and therefore providing services to insurers.”

That represents an astonishing potential for insurance telematics, especially since Renault-Nissan are not the only car-makers looking to either embed a UBI solution or offer one at the point of sale. For example, earlier this year GM announced that it was teaming up with the most successful UBI insurer in the U.S., Progressive, to offer its own insurance telematics proposition. And the recent sale of a majority stake of the U.K.’s leading telematics insurance provider insure the box to a Japanese insurer close to car-maker Toyota increases the likelihood that we are at the beginning of a sea change in the uptake of insurance telematics.

But is the provision of driver ratings and feedback, upfront discounts, good-driver rewards, and services such as stolen-car alerts enough to make millions of drivers embrace the solution even when it comes embedded in the car they have bought? A good part of the second day of the conference was spent discussing a potential benefit the solution can bring to both insurers and their customers that could eventually be a game-changer on its own: claims handling.

“Accident detection and proactive contacting of customers can become an area of competitive advantage for insurers,” said Kenny Leitch, global telematics director at RSA. “It’s one way telematics insurance can stand out in the marketplace.”

He maintained that the current UBI proposition would fail if there were no upfront discount. “Upfront discounting is necessary for customer uptake,” he said, but he added that in the future it may be possible to shed the reliance on upfront discounts if sufficient value-added services were provided. “But no one’s there yet,” he cautioned.

An efficient, streamlined and convenient claims-handling service may be one possibility to provide enough value to the consumer to replace the discount, he suggested. To support his proposal, he cited information from Accenture that customers who have submitted an insurance claim in the past two years were nearly twice as likely to switch insurers in the next 24 months than those who haven’t submitted a claim. “This is quite a challenge for us,” he said.

Comparing the sudden popularity of claims data to the explosive growth of jogging in the 1908s, Leitch said, “Everybody wants to get a hold of data from claims. . . Everybody wants to get that information. Because it’s valuable. They can make money from it. There’s margin in there. It’s very competitive.”

The claims data is usually accessed by various interested parties when an accident is reported. In this, UBI has a huge advantage. “The opportunity for telematics insurance, of course, is that potentially we don’t need anyone at the scene of the accident,” Leitch said. “And we can know that it’s happened before anyone has said anything. That’s the big opportunity.”

In addition, telematics insurers know more about what he called “the truth of the accident” and they know it earlier. These are both valuable advantages, Leitch said. “The more you know about the truth of the accident, the less it’s going to cost you. And the earlier you know it, the less it’s going to cost you.” In addition, if the claims process is handled quickly, the less people will be involved in it and the better the insurer can manage the costs, he said.

Then comes the problem of distinguishing a genuine accident from the false positives. In a later presentation, titled “Making Motor Incident Information Accessible,” Colin Smithers, CEO of Redtail Telematics, demonstrated how his company’s solution identifies accidents and distinguishes them from other incidents that resemble accidents in the data provided by the GPS and accelerometer, such as driving too fast over a speed bump or climbing a curb.

To come to an accurate decision on an incident, Smithers said, the claims staff needs “well- and simply-presented data,” the data quality must be high—that is, derived from sensors, carried on a high-quality signal and from a properly mounted data-capture device—and a number of presentation methods “must be offered in parallel to assist interpretation.”

Leitch said that of 200 incident messages sent by the black box to the server, perhaps only one may be serious enough for the claims staff to decide that it is necessary to get in touch with the customer. “That filtration is absolutely key,” he said. “If you get that wrong, you’ll have far too many false positives.”

The way a claims staff handles the phone call to the customer or his family after an accident is key to the relationship between the insurer and the insured. “Get that right, and the customer’s perception of telematics will change from monitor to guardian angel,” Leitch said.

However, if you get it wrong and call when there has been no accident, “the customer is generally okay with it because he sees that you’re acting in his interest,” he noted.

Data captured from the accident can also ensure that the damaged car is sent to the proper place for repairs, and if the car is unrecoverable it will immediately be sent straight to salvage, Leitch said. “This makes the customer claims experience much less inconvenient.”

Paul Stacy, R&D director at Wunelli, cited another, more vital benefit for customers. “In theory, it could be that you are unconscious and can’t make a call [after an accident], and [telematics] could potentially save your life.”

He summed up the benefits of the telematics claims handling solution by saying, “To the insurer it means lower claims costs, because there are fewer unproved third parties involved in the process. And for the customer, surely it means better service.”

As a result, Leitch said, “telematics is already becoming a positive disruptor in the claims space. Embrace it and work at it or risk losing your customer.”

However, some presenters, including Stacy, suggested that Leitch may be jumping the gun and that the UBI solution is not sufficiently mainstream to make it worthwhile for insurers to invest in transforming their claims process with telematics technology.

“Telematics in the U.K. is relatively niche, with just 2 percent of the market, and predominantly young drivers,” Stacy said. “Young drivers just want to get on the road and be legal. They’re not thinking about the best claims experience.”

With it being so niche, he went on, claims handlers are going to be reluctant to set up a new process.

“Take an insurer like The Co-operative,” Stacy said. “They have about 100,000 customers, say,—though they probably have more. About 1,000 of them have a telematics policy. And only about 10 percent of them will have an accident. Are they going to train a new staff for that?”

“When you have higher penetration and cheaper data, then claims managers will want to take a look at the solution,” Stacy said.

By that time, he suggested in a morning presentation, the proactive telematics claims handling process just described may already be made redundant by another telematics-enabled process, predictive first notification of loss (FNOL).

“The real power of telematics is actually having a look at the data differently, much differently to scoring driving behavior,” Stacy said. “It is having a look at patterns… and coming up with a leaderboard of people that are most likely to have a large loss, and predicting the large loss. If I was a claims handler I would find it much more powerful if someone gave me a list—it may represent only a percent of a percent of the book—of those most likely to have a large loss in the next two weeks.”

It is a matter of applying new techniques to looking at the data to find the higher-risk candidates for a large loss, he said. “And, let’s face it, we only need to save five or ten of these large losses a year and it pays for the program. It pays for what you’re doing for your customers.”

Stacy said predictive FNOL would look at variations in a person’s driving behavior and gave as an example a driver who might be influenced by younger people in a car, and therefore drives differently on Saturday nights than during the rest of the week. “You can see that in the data,” he said.

He said Wunelli is investing time and effort in coming up with the algorithms for predictive FNOL. “Why wait for the claim?” he said. “Telematics data is coming in every day. We’ve just got to get used to processing it differently.”