Commercial auto insurers shift gears on telematics

Constant connectivity has become synonymous with progress in our society, and the surge in connected vehicles on our roads is not just a trend; it's a paradigm shift that automotive insurers cannot afford to ignore.

Today's vehicles generate information directly linked to assessing risk. From GPS tracking to real-time diagnostics, telematics data offers a contemporaneous snapshot of driving behavior, vehicle location and health. This information is invaluable for insurers looking to accurately assess risk and tailor policies accordingly.

The question is not whether insurers should delve into telematics but rather how they can leverage this wealth of data effectively.

The data mother lode

Telematics data can be likened to gold waiting to be unearthed. The ability to mine this data effectively is crucial for insurers looking to stay competitive in a rapidly evolving market. Analyzing driving patterns, frequency of use and even the condition of the policyholder's vehicles can provide insurers with a granular understanding of the risk within their portfolio. This, in turn, allows for more accurate pricing and the creation of personalized insurance products.

Insurers are recognizing the need to tap into this data to remain relevant. According to a recent research report from SambaSafety, "65% of commercial carrier respondents indicate their company has some level of adoption with telematics, with the highest number still in the early stages." The first innovators in the telematics space have already begun to reap the rewards of their forward-thinking approach. By integrating telematics into their business models, these insurers have gained a competitive edge. They can offer more tailored policies, reward safe driving behavior and mitigate risks effectively.

The advantage that telematics provides lies not only in understanding risk better but also in fostering a relationship with policyholders that goes beyond traditional models. Telematics-informed insurance products show commercial fleet operators that insurers care about fairness and collaboration. Carriers that choose to ignore the potential of telematics risk falling behind competitors that have embraced the transformative power of connected vehicle data.

Navigating the data challenge

Despite the evident benefits, there have been some false starts in the adoption of telematics. One significant issue is the sheer volume and diversity of data from myriad sources. The big data challenge posed by telematics can overwhelm insurers who are unprepared to handle the influx of information.

To overcome this challenge, insurers need a source-agnostic solution. A system that can seamlessly integrate, normalize and operationalize data from various sources is vital. This allows insurers to focus on extracting valuable insights rather than getting bogged down by the complexity of managing diverse data streams.

With a source-agnostic solution, insurers are not tied to a specific technology or data format. This flexibility is crucial in a rapidly evolving technological landscape, enabling insurers to seamlessly adapt to new devices and absorb new data sources.

A graduated approach

Beyond organizing the vast sea of telematics data, insurers must also think about the best ways to leverage the insights that they gain from telematics by considering the following:

·       Where can telematics be most effective and quickly implemented within an organization?

·       What goals can be achieved with the data?

·       Does the insurer need to enlist the expertise of a third party to fill resource gaps or accelerate their plan?

To implement telematics data successfully, organizations must answer these questions before they get too far down the road.

The most effective approach to telematics will always be a gradual one. Considering the depth and breadth of this technology, it is best to move intentionally into the space, creating an opportunity to embrace telematics at a pace that aligns with organizational readiness. This involves a comprehensive assessment of existing data management systems, the integration of source-agnostic solutions, and the execution of telematics strategies that complement the insurer's business model.

Although a gradual, more methodical approach may take longer, there are ways for insurers to accelerate implementation, especially with the help of an experienced partner.

Why wait?
The shift from "should we" to "how do we" regarding telematics is not just a strategic choice; it's a necessity for insurers looking to thrive in a connected future. The early adopters have shown that the advantages of telematics are tangible and transformative. Insurers must recognize the urgency of embracing this technological evolution, not only to stay competitive but also to provide more personalized and efficient services to their policyholders.

The telematics landscape is ripe with opportunities, and those who approach it with a well-thought-out strategy and the right partners can unlock its full potential. The future of insurance is connected, data-driven and personalized — and the time to embrace it is now.