For motor insurance, driving behaviour is a better indicator of risk than demographics alone and there are a number of ways insurers can obtain this data.
Motor insurers are more advanced than most when it comes to leveraging big data to reduce claims costs, having been exposed to telematics for more than a decade or two. However, for hundreds of years some insurers have relied on the same limited datasets to price premiums. Embracing new datasets can provide insurers with a better understanding of the risk they’re writing but they must ensure that the data is of the highest quality and relevant to the line of business they’re writing.
Studies have shown that for motor insurance, driving behaviour is a better indicator of risk than demographics alone and there are a number of ways insurers can obtain this data.
Black Box Tracking
Many insurers will offer policyholders a discounted rate on their motor insurance policy for simply fitting a black box to their vehicle. However, insurers can take a more hands on approach to the data they collect by taking a closer look under the hood.
You can calculate premiums far more effectively by considering where, when and how the policyholder drives their vehicle.
- Where – is the policyholder regularly using rural roads, motorways or city routes?
- When – does the policyholder use the vehicle in peak times or at night?
- How – is the policyholder prone to speeding, harsh cornering or harsh braking?
Some of the elements listed above can increase the likelihood of a policyholder being involved in a collision. In particular, speeding, harsh cornering and harsh breaking are all early indicators of risky driving behaviour. Data analytics used to identify these risky behaviours could be used by insurers to trigger proactive risk management procedures to help change behaviour, reduce the chance of a collision and in turn reduce motor claims costs for all parties.
Increasingly popular in the UK following the rise of crash for cash scams, video technology can offer peace of mind to policyholders when out on the road. Drivers are using video to protect themselves from false allegations of driver error and the risk of fraudulent claims. And some of the latest systems offer video and black box (telematics) capabilities in one – like SureCam based here in the UK.
Some systems, with the policyholder’s permission, allow insurers or fleet management companies to view short video clips based on specific risky behaviours. The clips are automatically flagged and provided to the insurer or fleet management company to allow for more proactive risk management in a bid to try to change the behaviour of the policyholder.
Video provides all parties with an unbiased witness in the event of a collision. Instant uploads and alerts with collision footage can help to speed up First Notification of Loss (FNOL) processes to take control of claims and claims costs within minutes.
There have been a number of cases in the motor industry where video and black box data have helped to reduce collision frequency, insurance claims and premiums. To find out more, take a look at a couple here:
- Over 50% savings achieved on insurance claims using connected cameras.
Hot off the press, this eye opening study has been compiled by Plexus Law and compares the difference in claims costs from 4,500 vehicles, some fitted with cameras, some without.
- Acorn Insurance use black box and video data to price a premium that was fair, competitive and reflected the true level of risk within a new fleet client.
Whilst black box and video data can provide insights into driver behaviour and risk exposure, there are other data sources that can help to provide us with a better understanding of overall risk.
Other Data Sources
Weather data and road data can help insurers build a picture of the environmental factors that may have contributed to collisions historically. By developing a better understanding of the impact certain conditions can have on the frequency and severity of a claim, the insurer can help to raise awareness of the potential dangers with policyholders. For those insurers wishing to go the extra mile in keeping their policyholders safe they could provide driving tips to help navigate challenging conditions.
Armed with a clear understanding of the behaviours and other factors that correlate to claims, insurers can help to prevent collisions from occurring.
Benefits to Insurers
Data sharing between policyholders and their insurers presents an opportunity for the insurer to establish a closer relationship with their customer. If the insurer works with the policyholder to help keep them safe whilst they’re out on the road and rewards them with a fair premium the policyholder is much more likely to agree to sharing their data and remain loyal when it comes to renewal.
Demand for Usage Based Insurance (UBI) is picking up rapidly, buoyed by the emergence of car sharing schemes, vehicle rental and innovative Uber type business models. Data is the key to unlocking more flexible premiums for motor insurers. Implementing the tools to be able to deliver these types of tailored premiums increases your competitive edge in a very crowded market and helps you to develop new revenue streams.
Data Analysis & Insights
Insurers need the right platforms to be able to ingest and analyse data from a variety of sources easily to limit operational impact on the business. Quest Automotive from Concirrus is designed to do just that, it does the heavy lifting to allow insurers to focus their expertise in pricing risk and spending time with clients.