This could be the year telematics driving data actually provides meaningful information — and change — to insurers and drivers alike, allowing risk to be underwritten more accurately, experts predict. To pull that off, smartphones will be a critical tool despite their drawbacks.
Clients’ driving data has been available in some form for a number of years now — whether installed as a black box type of device in Europe or as a dongle through the OBD-II port in North America — but it hasn’t been necessarily easy to manage or put to great use, explained Ryan McMahon, vice president of insurance and global affairs at Cambridge Mobile Telematics during a recent webinar.
Telematics has been merely a data collection tool to this point. Going forward, it can be more multi-use, such as providing feedback to the driver about their driving habits. That makes it much more helpful in terms of changing driving habits.
And it’s all thanks to one piece of technology: Smartphones. While they’ve created their own set of problems in regards to driving behaviour, McMahon said they’re changing the game when it comes to telematics and data usage.
“With the advent of smartphones, you have the ability to have that two-way conversation with a driver and provide feedback and that incentive to them,” he said during Cambridge Mobile Telematics’ webinar, P&C in 2021 – Market Catalysts. “And that has really changed the business model for a lot of carriers because they’ve moved away from a short-term monitoring period and gone to a continuous engagement-type program.”
The incentives part is crucial for the two-way discussion because the driver needs something in return for giving up their driving behaviour and having insurers, in essence, watching them, Mike Zaremski, P&C and insurtech investment analyst at Credit Suisse, said during the webinar. That financial reward can also be an incentive for them to change their driving behaviours.
McMahon agreed, saying that incentives can be regularly updated to match the desires of customers.
“From a monitoring perspective, for sure, people do change when they know they’re being ‘analyzed.’ They’re being scored as a report card, but that doesn’t stick for the long term unless there are incentives that give that driver the reason to keep paying attention to their driving behaviour,” he said. “We’ve seen many of our customers use that exact strategy to create long-term sustained changes in things like distracted driving, things like at-risk speeding.”
For example, telematics apps will track if a user is being distracted by their phone while driving. Knowing they’re being penalized for using their phone could lead to drivers not checking it while in the car. McMahon said a 10% reduction in smartphone distraction equates to about a 1% reduction in expected crash frequency.
It’s this type of data that can help insurers better underwrite risk, Zaremski said.
“If an auto insurer can see where and when you drive [and] how much you’re using your phone, you have just a much more robust data set to underwrite the risk more accurately,” he said.
Canadian Underwriter reached out to a handful of insurance companies to find out how many vehicle crash claims were the result of distracted driving. While no stats were provided, the general response was that few, if any, drivers actually admit they were distracted at the time of the collision. However, in a 2019 interview, Phil Gibson, Aviva’s managing director of personal insurance, noted a the insurer has seen an increase in single-vehicle and front-end crashes, which can likely be attributed to distracted driving.
“I think that COVID has that kind of accelerated insurer understanding of the need to invest in digital capabilities such as such as telematics,” Zaremski said. “I think you’ll see insurers lean on the insurtech industry more…to get these technologies in the hands of the consumer or just get the insurers to adopt.”