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By: Nathan Golia

Early in the development of telematics and usage-based insurance, insurers took great pains to remove the “big brother” aspects of the technology, assuring customers that locations wouldn’t be tracked, for example. But as underwriting losses attributable to distracted driving are on the rise, telematics vendors are looking to sell insurance carriers on a new dimension for their technology: Driver behavior monitoring.

While popular in commercial auto lines of business, personal lines insurers have been reticent to wade into using technology that can detect unsafe cornering, lane awareness or even fatigue. But according to a recent report from Aite Group, “Driver Coaching With Telematics: A Pathway to Carrier Competitive Advantage,” carriers who are smart and clear about their initiatives could find success.

 “Consumers have been reluctant to release personal driving data directly to carriers without well-defined benefits, leading to low adoption rates and sporadic usage,” writes report author Greg Donaldson. He suggests that carriers “define the driver behavior program as a benefit for the consumer” in three ways:

  • Transparency on the impact of driving habits on insurance rates
  • Long-term driver safety improvements through feedback
  • Consistent rewards tailored to each customer, such as gift cards, premium discounts, or other programs

“As drivers improve through communication and coaching, their risky driving behavior decreases, leading to fewer and less severe claims,” Donaldson writes. “As frequency and severity improve, insurance carriers will see lower claims expenses and claims reserves, resulting in reduced pressure on profits. The benefits of improving claims experience extend throughout the insurance carrier, from expenses to cash flow.”

Aite suggests vendors look to “tier 1 or 2 insurers looking for a competitive advantage” as potential homes for their technology. Some of these carriers have already begun explicitly addressing distracted driving in their UBI programs: Farmers launched Signal in 2017 and Nationwide announced this year it is is expanding the purview of its SmartRide to cover distraction.

 

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