In the first half of 2015, the National Safety Council (NSC) tracked a 14 percent spike in fatal collisions, with an estimated price tag of $152.0 billion. To put it bluntly, we’re looking at the largest percentage increase in traffic deaths in almost seventy years.
So what’s driving the trend? Pete Bigelow, an Auto Blog contributor, chalked it up to low gas prices and a better economy, which have brought “road-trippers, commuters, and motorists of every kind” out in droves.
“More miles driven, more cars on the road, more accidents,” said Tom Wilson of Allstate.
For his part, Warren Buffet blames texting. “If cars are better — and they clearly are — drivers must be worse,” he said. When he said cars are better, he was probably referring to what Yahoo Finance called a “proliferation of newer, safer cars with stability-control systems and air bags.” These safety features, paired with tougher DUI enforcement and the spreading use of seat belts, have been knocking the number of fatal crashes steadily down during the last decade.
The current spike in fatalities flies in the face of that. And unlike economic recoveries of the past (which brought their own boom of drivers on the road), our current recovery is the first to happen in a culture of texting and driving.
The NSC estimated that one in four crashes involves cellphone use, despite ever-toughening legislation. Texting isn’t the only problem. Devices in general – from cell phones to infotainment systems – have made the problem worse.
As for the impacts, major auto insurers are reeling now. Both Geico and Allstate are raising premiums to offset the unexpected costs. Allstate is averaging an increase of 3.9% on its main offering, while Geico is raising rates “as needed.” And according to analysts, these insurers won’t be alone.
Can insurance telematics buck this trend?
Here’s where the story gets interesting. As other major insurers stumble for balance amid the unexpected spike in fatal crashes, Progressive is sitting pretty.
According to Progressive CEO Glenn Renwick, the company has seen an increase in miles driven, but that hasn’t correlated with an increase in claims. Rather, the situation is “very favorable right now.”
Could telematics be their secret weapon? It’s possible. Progressive has been using Snapshot to incentivize safe driving for more than a decade now. As early adopters, they were able to acquire that first wave of best-qualified PHYD drivers. On top of that, those telematics customers have spent years with a strong incentive to fine-tune their habits and practice their skills.
“Progressive may be attracting some of the absolute safest drivers,” said Leslie Scism of Wall Street Journal Money Beat. “So even as the number of miles driven by Americans is up amid a recovering economy and lower gas prices, Progressive’s growing book of Snapshot drivers are good, defensive drivers who leave ample distance between their cars and the ones in front of them to avoid causing wrecks—among other safe driving behaviors when they get behind the wheel.”
The insurance telematics industry is moving fast. This was quite apparent at Insurance Telematics USA in Chicago earlier this month. Just one year ago, the main topic debated was whether insurers should use smartphone apps or OBD hardware to track drivers’ behavior. This year, that question was no longer a question. The industry has moved forward with smartphone telematics adoption.
As evidence, look at industry leaders Deloitte, Progressive and Allstate.
At the show, Deloitte spoke about the great success of the accuracy, reliability and maturity of the D-rive end-to-end smartphone UBI platform, powered by Driveway Software technology. Bill Mullaney, co-founder of D-rive powered by Deloitte, stated that a good mobile solution captures 90 percent of miles driven, which is much closer to reality than drivers’ self-reported mileage. The National Association of Mutual Insurance Companies recommends the D-rive program as the telematics solution for its members.
Last year, Allstate expanded its Drivewise UBI program by unveiling a Drivewise mobile app to gauge driving behavior through the smartphone. This year, Allstate’s award-winning smartphone app now features Allstate Rewards allowing safe drivers to earn points that they can spend on deals for merchandise gift cards and local offers.
Even more interesting: Through Drivewise Mobile, any driver can use the app to earn rewards points, regardless of whether they have an auto insurance policy with Allstate. As Allstate’s usage based insurance general manager, Nate Breyer said in a TU-Automotive interview, “We’re focusing on providing a product to attract and retain the safest drivers. We know that drivers that want to be safe want to be rewarded for that driving, and our UBI product gives them a means for proving that they’re safe and thus being rewarded.”
As another sign that mobile insurance telematics apps are on the rise, Progressive launched a pilot for its smartphone-based solution that should be available to select U.S. customers in September. In another move to use smartphone telematics to move beyond discounting to attracting new customers, Progressive’s smartphone app is rumored to be available for everybody to try before they buy.
The new question on the table: how to leverage big data.
Now that insurers have confidence in smartphone-based telematics solutions, the new question on the table is how insurers can leverage big data and use smartphone telematics to move beyond discounting.
We all know that people love their devices and they love their apps. How can auto insurers create usage based insurance apps that will facilitate remarkable experiences for their insureds? While Allstate has taken a giant step in the right direction with its rewards approach, there is much, much more to be done.
In addition to looking at creative ways to use apps, it’s important to use big data to find creative sources for new market share.
In Driveway’s presentation, “Grow Sales from Stagnant to Standout,” we discussed how to identify key growth opportunities in an industry that’s not growing by focusing on the safest standard drivers and the safest non-standard drivers, including new entrants. We used data collected from 248,415 drivers using the Driveway app to evaluate driving scores and identify key opportunities, including certain segments of senior drivers, millennial drivers, and new entrants (those coming off parents’ policies or new to the U.S.).