Insurers are recognizing the importance of discounts to penetrate U.S. and Canadian markets. But this calls for the combination of product features.
Something seriously required in favor of the auto insurance policy holders in United States of America and Canada. UBI adoption is growing at a frenetic pace in North America according to the figures released by BI Research. Market watchers are keenly observing the growth of auto insurance and the factors that can pose challenges to auto insurance industry. Figures depict a rosy picture. Telematics based auto insurance growth rose from 4.1% in 2015 to 6% in 2016 in North America. The growth is pegged at 19.2% in 2019. What is the role of telematics expertise in expanding market reach? Can discounts increase the subscriber base? Is there any pitfall? Let us explore.
Insurers are constantly on the lookout for cost effective ways of doing business with telematics. But convincing policy holders seem to be their challenge. Yesterday’s know how is passe with newer and sophisticated knowledge developing on ICT front. Data collection and customer engagement hold the key for success in the wired world today. Aspiring policy holders can be convinced by the insurers with cutting edge technologies like: Driving data capture, direct marketing channel, Roadside assistance (NSD Partner), Geo analytics and gamification to mention a few. The millennial and Gen Z are technophile demography for the telematics market.
Technical features are for risk mitigation and discounts are for cost reduction. If both factors are combined market penetration is easier. At this point an expert is taking a balanced view. Donald Light the director of Celent, a research and consulting firm, is of the opinion that a combination of both discounts and surcharges can provide a bright future for telematics in Canada. He was sharing his view during ‘Insurance Telematics Canada 2016’ in Toronto. We all know surcharges are additional premiums against risky driving behavior. And Light suggest this to change the driver perception on their driving.
What perception Light wants to change? People pay a price for a product or service on their perception on quality. The same theory is applicable to one’s perception towards driving. If one thinks he is a ‘better driver’ and not an average driver which he actually is, then encouraging them to implement telematics mobile app to avail discounts will become a demanding task. Because his self esteem comes in the way of enhancing his driving behavior and accepting drive score as ultimate criteria for improving his driving. It is at this very stage only education is needed to change perceptions.
The very purpose of UBI is to reward the well behaving drivers on criteria like speed, acceleration, phone use etc. Vast part of the population are mobile and it makes sense for them to implement telematics mobile app on their mobile devices to mitigate accidents as well as earning drive score to avail policy premium discounts. Education is needed to change wrong perceptions of drivers to accept UBI as fair and to understand what standard driving behavior is.
Education should be extended on ensuring cyber security as telematics mobile apps are also prone to cyber attacks. This should be seen in the context where 60% of cars and trucks are going to be connected on net by 2017. This means tailored telematics services should address cyber security issue also to gain more acceptance in the market.
Switching to telematics is a good option; it is also promising for the insurance sector that wants to expand its reach. Cutting edge technical features, discounts for drive scorecards as well as surcharges for errant driving behavior can increase the acceptability of mobile telematics thereby attracting new mobile subscribers. If these issues are addressed, auto insurance market penetration will become easy.