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Telematics insurance

Telematics insurance

Over the last few years, we have watched the organisational environment become more and more complex, uncertain and dynamic, largely due to the technological development and, in particular, the ability to connect people to devices – the so-called Internet of Things (IoT). This new reality boosts the telematics insurance concept – that is, it promotes the development of insurance products that benefit from the transmission, receipt and storage of data using telecommunication equipment.

Taking this reality into consideration, i2S, as a software house dedicated to the insurance industry, tries to incorporate in its products the technological and business dimensions that best contribute to the development of solutions that are innovative and attractive to the insurance companies. In this sense, i2S is developing the ModAPNVida project, whose explored dimensions include telematics insurance.

In practice, telematics insurance promotes a new approach to the customer journey. Traditionally, in the insurance industry, the customer journey  focuses on three aspects in particular: the act of purchasing insurance, the time of payment and the event of a claim. With the adoption of telematics, insurance companies may revolutionise this reality, and, at the same time, bring about a closer relationship with their customers.

One of the great advantages of telematics has to do with the capability it grants insurance companies to offer their customers insurance products that are adjusted to how they use the insurance or to how they behave. For instance, this reality can be applied to the motor insurance, where you can find two different types of products:

  • Pay As You Drive (PAYD): the customer pays according to the use of the vehicle;
  • Pay How You Drive (PHYD): the customer pays according to his/her behaviour while using the vehicle.

These approaches are possible because telematics provides data as diverse as miles travelled, date and time of driving, most used road types, location, average speed or type of driving practised. These data allow insurance companies not only to design a customised product, considering the driver’s profile, but also to maintain a closer contact with the customer. This contact may include, for instance, sending advice regarding safe driving behaviour, something which becomes a prevention measure, with the aim of reducing claim risk.

On the other hand, the insurance company may also implement the gamification concept, allowing each customer to be rewarded for his/her behaviour, and thus creating a close and continuing relationship with the customers.

Telematics also enables insurance companies to offer a better service in the event of a claim. Learning about the accident in real time allows the insurance company to immediately provide assistance to the customer, by rendering services such as towing service or victim support service.

Finally, the access to richer data in real time enables the insurance company to implement fraud detection procedures, thereby minimising the costs arising from the existence of transgressors, and increasing the benefits for the good customers.

Figure 2 shows the new customer journey originated by telematics insurance.

However, before they move forward and take advantage of this technology’s full potential, insurance companies must address the issue of how they will manage the massive amount of data this technology generates. Hence, big data becomes the new challenge for the insurance companies, not only because of data volume and variety, but also because of how fast new data are generated.

Nevertheless, this reality translates into an inexhaustible source of information, which is obtained by conducting new analyses to new data. In this new paradigm, insurance companies may get to know their customers better, and create products and services that meet their customers’ expectations. Additionally, insurance companies may benefit from this knowledge to get a more accurate risk analysis and reduce their exposure to the risk. In practice, big data may be seen as a tool that allows insurance companies to get to know, win and retain clients.

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