How telematics data portability may impact auto insurance

Do you remember the shift from price-driven “dollar-per-minute” thinking that dominated telecommunications and tv ads in 1993 to the value-driven packages of today’s “unlimited” data-services framework? 

For the insurance industry, the internet revolution brought similar benefits, such as faster shopping and quoting services, but it hasn’t altered the fundamental way many insurance customers shop for auto insurance which is mainly based on price. Consumers may not be aware or understand how their risk profile may impact their auto insurance premium. Now, we are at an exciting time where the Internet of Things and telematics specifically, are bringing more transparency and more customized offers into the auto insurance shopping criteria. This provides an opening for consumers to better assess value in addition to price. 

Data value

Telematics is one reason carriers can create a more transparent and more personalized customer experience, whether it’s in connection with a marketing, underwriting or claims management use case. Telematics shifts the conversation to both price and value, allowing the insurer to remind the consumer that by sharing their driving and vehicle data, they have the opportunity for more accurate pricing and better service.

According to a July 2022 U.S. Consumer Survey, 67% of respondents were aware their driving and vehicle data can be used for insurance discounts, but only 22% of consumers have used their data for insurance discounts. Among those who had not used their data for insurance discounts, 71% said they were interested in doing so.

Based on these survey results, it is clear that consumers see the value and benefits of auto insurance policies that include telematics but may struggle to actually get engaged or started in such programs. 

To be responsive at scale and give their customers the opportunity to leverage their driving and vehicle data to qualify for discounts, other benefits or tailored services, many insurers are looking to supplement their current telematics solutions by participating in telematics exchanges. By adopting this exchange approach, carriers can increase their speed to market in offering telematics-driven policies for their customers or continue to lead the pack, maximizing their investments and giving them an edge in retaining their customers while also capturing new potential policyholders.   

Telematics exchanges

The direct usage-based insurance benefits of telematics have sparked interest in how the data portability of a telematics exchange can benefit insurers and consumers in other ways.

For consumers, exchanges help make telematics data portable by offering consumers the opportunity ​to use their driving and vehicle data when shopping for auto insurance with any insurer. Consumers may finally be able to take advantage of sharing that data ​with multiple insurers during the many phases of a carrier-customer relationship, allowing consumers to shop and find an auto insurance policy that best fits them. This notion of data portability may soon become a key resource for consumers, helping them to share their driving and vehicle data with insurers and allowing them to leverage connectivity to access more personalized insurance ​offers. Just as consumers’ ability to maintain their phone number as they switched service providers was widely accepted, we expect the same sentiment around telematics data to soon trend in the auto insurance industry.

One carrier-specific benefit of data portability is that it helps insurers to make immediate prompt offers to consumers based on their driving behavior, instead of enticing them to sign up for a trial period. But to do this properly insurers should choose providers whose telematics-driven UBI solutions are in alignment with the Fair Credit Reporting Act (FCRA) guidelines and informed by the data available in a telematics exchange, which are in a better position to design and offer personalized pricing to consumers they most wish to pursue both at point of quote and renewal. 

Telematics exchange participation also aids in insurers’ risk assessment, improves underwriting performance, and provides an opportunity to offer the personalization you typically see from the agent network. In addition to supporting risk assessment, participation in an exchange can help insurers optimize claims management. 

Risks

Thoughtful telematics exchanges fundamentally help change how insurers attract, underwrite, and manage risk and provide a variety of benefits; however, there are a few things to consider:

Choosing the right telematics exchange can simplify data privacy issues, ensuring best practices in consent and FCRA guidelines are managed by the experts – not all exchanges are the same.Telematics data is subject to stringent (and increasing) regulations that vary from state to state; a partner-managed exchange can sort through those details with assurance. To get the most insight and efficiency out of telematics data, data hygiene must be maintained at a high level. An optimal telematics exchange focuses exclusively on data management, data normalization and standardization to help deliver the best quality data to insurers. 

A well-managed exchange helps provide insurers with a more efficient method to leverage telematics to win customers and keep business – redefining new, value-driven relationships that better benefit insurers and consumers alike. 
More cars and consumers are becoming connected each day, and there’s no time to waste. Opportunities will grow as more drivers sign on and more vehicles are connected. As the market heats up, it’s time to better position insurance for rapid innovation in telematics. 

The insights you bring – to brands, underwriters, agents, and customers – will help drive more meaningful relationships, increase retention, enhance product innovation, lower costs, and make roads safer. 

Fueled by the benefits and power behind telematics exchanges, insurers can scale up quickly and provide a more personalized customer experience that could differentiate their brand and better deliver on their promises.