Smartphone Telematics on the Rise: Conditions Optimal for Growth
In insurance telematics, it’s easy to see which way the wind is blowing. And the wind is blowing fast.
From the recent court battle over telematics patents, to the hunger for UBI programs among commercial fleets, to the enthusiasm for pay-as-you-drive insurance among millennials, the opportunity for growth has never been so ripe. Below are a few key indicators …
Patent liability restrictions removed
When Progressive launched its telematics program Snapshot in 2010, it obtained multiple patents “related to online customer experience, insurance telematics and driving scores,” said Insurance Networking News. Since the launch, five of these patents have become the object of a battle.
In the U.S. District Court, Progressive claimed that Liberty Mutual, Allstate, State Farm and The Hartford had infringed on its intellectual property rights. Long story short, Progressive lost. The U.S. Court of Appeals ruled that the four competing insurers are allowed to move forward on their telematics programs.
“We expect UBI to become dominant in auto insurance over the next few years,” said Mark Breading of Strategy Meets Action. “While premium discounts are still the primary value proposition, to stay competitive insurers will need to enrich the value through a variety of other services triggered by the new data on location, driver behavior, and vehicle performance collected from the vehicle.”
By removing this barrier to telematics programs, the Court’s decision opens the door to models that “have been proliferating over the past few years,” said Matthew Josefowicz of the insurance IT research firm Novarica. “Assuming this ruling stands, personal lines insurers will have no excuses not to incorporate telematics into their pricing models.” As a result, we can expect the decision to “accelerate adoption of telematics in insurance,” he said.
Commercial fleets are prime candidates for telematics
According to a study by LexisNexis, there’s a large gap between commercial fleets that are enrolled in a telematics program (6 percent) and those that are interested (25 percent).
“This indicates a substantial market opportunity for insurance carriers to raise awareness and eventually adoption, especially with small fleets of two-to-five vehicles,” said Deke Phillips of LexisNexis. These small fleets “indicate interest – but they aren’t being reached,” said Insurance Networking News. In fact, the smaller the fleet, the lower the awareness of insurance telematics programs.
Even so, commercial customers are almost twice as interested in smartphone telematics as are personal lines customers. The technology offers them a better vantage point on the behavior of their drivers, more data on risks that could influence fleet policies and protect profits, and driver feedback to improve scores and make roads safer.
Interestingly, the study estimated that 60 percent of fleet managers would stay with their current insurer if they were offered a UBI package with a 10 percent discount. But if an alternative carrier beat them to it? More than half would probably jump ship.
In short, insurers stand to gain a competitive edge by offering small fleet managers the insurance telematics they want.
Millennials are on the rise, and they’re bringing telematics with them
It’s happened. In the U.S., there are now more millennials than baby boomers. And according to the 2015 Towers Watson survey on insurance telematics, 93 percent would not hesitate to purchase a UBI policy if it didn’t increase their premiums. Why? They believe it’s simply a fairer and more transparent way to calculate rates – especially when it’s delivered via smartphone.
To find out how to capitalize on the growing demand for smartphone telematics, download our new white paper, “How to Survive and Thrive in a Stagnant Auto Insurance Market.”