Driver Safety Scoring: Should People Pay More for Opting Out?

driver-safety-scoringAnyone who knows a thing about telematics knows that it can score driver safety. That’s part of the essential value proposition, and for several years now, insurers have been leveraging this capability to hone their accuracy in risk assessment and calculate premiums more effectively.

Drivers, have also benefited, as the same smartphone app that delivers their coverage can also detect when their driving is suboptimal and offer feedback and scoring to inspire them to improve.

None of this is news. But it sets te stage for a development that is at once both straightforward and groundbreaking.

Allstate just filed a patent application for a driver safety scoring system that would analyze a variety of telematics data (including “speed laws, road signs, traffic signals, weather and possibly even biometric data such as your heart rate,” said Amy Danise at Insurance Thought Leadership) and use the results to determine what type of insurance a driver can buy, at what cost.

When telematics data first came onstage, thought leaders knew it was only a matter of time before that data would be put to a variety of new uses, disrupting the industry and opening up new possibilities for how insurance is bought and sold. This is one of those possibilities.

To be clear, it’s not the scoring system that’s novel. Other companies have already built various versions of their own. LexisNexis has one, Danise said, for example. Rather, it’s the idea that one could weave driver score into the sales funnel itself, using it to match customers with policies to premiums.

Questions follow. For example, if drivers opt out, should insurers who’ve adopted this type of plan-selection require them to pay more? Let’s explore that.

No, people shouldn’t pay more for opting out

On one hand, it’s not smart to force one’s customers to do anything they don’t already want to do. Those that do run the risk of driving customers into competitors’ arms. And while driver scoring is indeed a popular draw, were the feature to be associated with the notion of penalty, it would not be smiled upon.

“If you tailgate, speed, drive through high-crime neighborhoods or even drive at night, insurance companies might be able to justify charging higher rates, regardless of whether you get a ticket or cause an accident,” Danise said - and no one wants to divulge information that could result in having to pay more.

Yes, people should pay more for opting out

On the other hand, to ask someone to pay more for opting out isn’t the same as giving them no option at all. It is, rather, a way to nudge them in the direction you wish them to go while respecting their preferences on the matter.

Now, in cases where that wish is entirely one-sided - where some new development would be great for the insurer but not helpful at all for the policyholder - it would be unwise to push it. But in the case of driver scoring, customer sentiment is overwhelmingly positive.

“Many consumers seem interested in getting driver scores and improving their own driving,” Danise said. “In March 2015, LexisNexis asked slightly more than 2,000 consumers whether they would be interested in a smartphone app that measures their driving score and offers ways to drive better, without any insurance discount. Fifty-nine percent said it would be nice to know their score, and 50% liked the idea of improving their score.”

True, some laggards will never willingly join the scoring party. But one mustn’t look to laggards for leadership when considering how to shape the future of the industry. As the business model changes, what’s disruptive now will evolve into the new normal. It would be a waste not to channel the insights that safety scoring offers into one’s business model. And one way to nudge customers in that direction is to ask them to pay more if they opt out.

Interested in seeing your driving score? Sign up for a Driveway Software pilot.

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