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Exploring untapped telematics opportunities for insurers

Reducing risk is only the tip of the opportunity iceberg for insurers deploying telematics solutions, as the potential to be unlocked is immense.
David Noakes
By David Noakes
Johannesburg, 01 Oct 2024
David Noakes, software developer, Retro Rabbit.
David Noakes, software developer, Retro Rabbit.

Telematics − trackers or apps to combat vehicle theft and improve driver behaviour − is well-established in South Africa, with several insurers making use of the technology to manage risk.

But reducing risk is just the tip of the iceberg of opportunities telematics offers insurers to improve business, grow engagement with customers and increase customer retention.

The classic reasons for insurers to deploy telematics products include encouraging better driving, accident detection and enabling smarter data-driven risk models to inform premium pricing.

There are three key telematics models, each with pros and cons.

The fixed in-vehicle device comes at a cost to customers and generally depends on a good ongoing partnership with a tracking service provider. The initial commitment required is high from the potential customer, and the option of trying it first is off the table. However, once the device has been installed, there are no management complexities for the customer to worry about.

The more frequently the customer uses the app, the more the brand itself becomes part of their daily life.

The smartphone app model has a higher upfront cost for the insurer since it must be developed to be compatible with many smartphones. The data gathered won’t be as reliable as a fitted device, as the app may record driving data when the customer is a passenger or not in their insured vehicle. In overcoming these challenges, how the insurer builds the rules and designs the product makes the difference.

The hybrid option is a middle ground − this includes an app and a fixed device in the vehicle, which eliminates the challenge of knowing whether the customer is in their car or not.

No model is a silver bullet, and possible pain points need to be understood and carefully planned for. However, if the right balance for the product can be found, the potential to be unlocked is immense.

Foundations first

Any approach to telematics is a significant investment. A solid foundation is paramount to its success. A well-built insurance app solves customers’ core needs first. Customers need to know they are covered, can claim when needed and retrieve important documents.

These fundamentals cannot be overlooked and go a long way towards retaining customers. Increasingly, insurers are striving to build the Swiss Army Knife of apps, yet, just as with the famous knife, the app remains a tool and nothing more, as it will only be used when needed and this may not be very often.

A key opportunity that is often overlooked is that telematics can also serve as a great driver of user engagement and help insurers build closer relationships with customers.

Customers drive often, perhaps even every day, or multiple times in a day. This introduces a golden opportunity to massively increase user engagement via a telematics app.

Something as simple as showing the customer their driving habits can lead to more app opens and a longer time spent within the app. By gamifying the experience or responding to driving performance with a nudge when customers drive badly, or praise when they drive well, insurers can make their brand part of customers’ daily lives.

The more frequently the customer uses the app, the more the brand itself becomes part of their daily life. The resulting engagement − and data − can be integrated with the insurance product and the insurer’s strategy to offer more value and a better customer experience.

The well-built app

To get the most out of telematics, it’s important to get both the technology and the organisational approach right. If you push it too hard and it becomes a chore for users, you've created a pain point. The success of telematics depends on the design of the product and how it's positioned.

In our experience, the well-built, well-thought-out telematics app offers the greatest value for the insurance sector. It can serve as a virtual Swiss Army Knife, offering measurable benefits for insurers and their customers, possibly with additional features like accident detection and automatic emergency response.

By making it an indispensable tool, the well-built app overcomes the challenge currently facing insurers: customers only open their insurance apps very rarely to check their cover, update information, or lodge claims, and insurers miss the opportunity to engage meaningfully with them on the platform. The well-built app becomes an integral part of customers' daily lives.

Key learnings in SA

In a widely-used smartphone-based telematics app we developed for the insurance sector some years ago, we found that most insurance customers saw great value in using the app and getting rewarded.

Although we catered for these users, we were surprised by the amount of people willing to try out the product before taking up a policy.

It transpired that customers enjoyed checking in regularly to see how well they drove, and the app helped keep road safety top of mind. Basic engagement metrics tracked significantly higher than that of users opting to not use the telematics offering.

Technically we also learned a great deal − notably that the volumes of data emerging from telematics can be higher than expected, putting pressure on processing and storage. At the same time, this data offers massive potential for analysing trends, making forecasts and managing risk.

The well-built, well-implemented telematics app achieves key insurer objectives − reducing risk, engaging clients and improving customer experience.

It positions insurers to be a daily part of their customers’ lives, exposes clients to the brand, adds value for them and helps build trust.

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