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This Simple Step Can Truly Change The Game
10 Feb / Author: SK Tirumala

Impact of Mobile Telematics in Personal Auto Value Chain

Usage Based Insurance (UBI) continues to gain momentum in Personal Auto, with many leading insurers offering straightforward safe driving discounts, to more sophisticated pay-per-mile (PPM), pay-as-you-drive (PAYD) and pay-how-you-drive (PHYD) products. Good drivers with clean driving history are shifting to these lower premium policies, in exchange for providing data on their driving routines and habits. While many consumers continue to be against sharing their driving data for privacy reasons, the tipping point is not far for a massive shift from buying standard policies to trying UBI policies. One of the biggest enablers this conversion is availability of smartphone-based telematics solutions, which are cheaper and easier to deploy than traditional hardware devices. This article however is about helping understand the big-picture impact a mobile telematics solution can have when bundled with digital policyholder services.

Many insurers are still in pilot mode and tip-toeing their way in, due to a variety of reasons ranging from concerns on meaningful adoption, to lack of conclusive proof that loss ratios would improve, to complexity of developing discount models that convince regulators, or to lack of trust on the technology itself and accuracy of data delivered by it. If the concern was just around technology and data, then we can weaken that argument with proof that well over 36% of the top personal auto insurers that cover over 50% of the personal auto market in the US are already using smartphone telematics to offer 15%-30% discount on premium in exchange for access to driving data. That would not have happened if the smartphone approach was still experimental, and had not proven to be working.

As it would be expected of any strategic initiative, launching UBI products and/or offering safe driver incentives, would also demand a solid business case and supporting ROI analysis, for approvals and organizational prioritization. Unlike typical technology projects that can be expensive, time-consuming and resource intensive, smartphone telematics solutions are simple to plan, quick to implement, and can deliver significant ROI. The reason is that a bundled smartphone solution can simultaneously advance many strategies, and deliver tangible benefits to multiple departments across the insurance value chain.

Even if a standalone mobile telematics solution (i.e. without other policyholder services) is pursued, the ROI is proven to be quite significant; with risk appropriate pricing driving the topline growth, and conscious driving the driving improvement to the bottom line. However, if the solution was bundled with digital policy and claim services, then benefits and the ROI are compounded further, to increased awareness and adoption.

The picture below maps the features of a bundled mobile app across various links of the insurance value chain that can empower associated strategic objectives to improve risk selection, sales, and service. No alt text provided for this image

The diagram also conveys that the key to maximizing benefits from smartphone-based telematics is to think beyond just reducing claim costs. Instead insurers should look at the opportunities that a well-scoped solution could create to sell, interact, and service better using mobile digital services, and simultaneously reducing the exposures with driving data analytics. The trick to achieving this high IRR is to develop an app that appeals to the policyholder as extremely useful tool to possess. Aggressive marketing across agency, social and digital channels is needed to generate awareness of the rich features offered in the app, with a clear articulation of “what’s in it for them”. If mobile app features are engaging, valuable and easy to use, consumers will be drawn to downloading and using the solution.

The estimated internal rates of return (IRR) for some initiatives have been well over 100% (15% IRR being a typical threshold to approve projects). It may appear too good to be true, but it is not far-fetched at all, especially when all of the possible benefits are captured by the solution.

For those who wish to start this journey cautiously, a well-planned crawl-walk-run strategy is a sound approach. It means begin with a digital policy services mobile solution, but with an embedded telematics engine that can be selectively turned on to test and refine the strategy of using driving behavior data for reducing exposures.

Many small to mid-sized insurers that have not initiated their mobile strategy have not yet realized the opportunities being missed by not having a mobile app for their customers. Mobile-responsive web portals cannot simply provide the experience customers are looking for. Moreover, with UBI products gaining momentum, it is time for these auto insurers to plan and prepare for what seems like an imminent transformation of auto insurance market. With modest investments, significant monetary benefits could be realized across the value chain, not to mention, the priceless value of saving lives by reducing accidents and making the roads safer.

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SK Tirumala

SriKrishna “SK” Tirumala

CEO & Co-Founder

stirumala@xemplarinsights.com

Over the last 24+ years, SK has been at the forefront of delivering technology solutions in Property & Casualty. For the last few years, he has been spearheading the development of risk management solutions at Xemplar Insights, LLC. As the head of the business, SK passionately leads R&D and product engineering teams to advance the Xemplar product portfolio. He is continuously associated with customers, prospects and industry partners in solving their chronic business issues with cutting-edge technology.

Xemplar Solutions Suite

UBI Telematics Solution
Xemplar Auto is a product for Standard, Non-Standard, and Preferred Personal Auto Insurers as a white-labeled mobile app for insured policyholders to provide digital policy services and risk prevention. Xemplar Auto includes the digital policy services found in Xemplar Engage, but also adds robust, smartphone based telematic features for driver safety self-assessment and targeted risk management. The solution is a Mobile app (iOS, Android) for insured drivers, and a cloud-based portal for carriers that provides a variety of BI reports for risk exposure analysis, etc.

Mobile Customer Engagement
The Xemplar Engage product was created for Insurers and MGAs to provide policyholders a white-labeled mobile app for digital policy services, claims services and communications. Xemplar Engage can be configured, enhanced, and extended to offer policyholders mobile services across multiple insurance lines. The solution is comprised of a Mobile app (iOS, Android) for insureds, and a Cloud-based portal for carriers with app utilization reports.

Collaborative Loss Control
Xemplar Fleet is offered to Commercial Auto Insurers (small businesses to large fleet owners) as a white-labeled fleet risk reduction solution which can be offered to insured accounts, as their insurer’s solution to control claims and losses. The solution is made of three parts, (a) Mobile app (iOS, Android) for covered drivers, (b) Cloud-based administrative portal for Fleet Managers for each Commercial Account, and (c) Cloud-based administrative portal for the Carrier that oversees the complete set of fleets using the app.

Commercial Fleet Telematics
Xemplar Drive – Business was designed as a non-white-labeled option for Commercial Auto Insurers that believe that the policyholders will be apprehensive about using a data gathering solution provided by their insurance carrier. Xemplar Drive – Business would be referred by the insurer to the Commercial Auto policyholders (small businesses to large fleet owners) as a solution for risk prevention and loss control.
Xemplar Drive – Business is also available as a white-labeled off-the-shelf B2C subscription-based solution (SaaS or private) sold directly to Large Corporates, Commercial Businesses, and other Institutions that operate a fleet of vehicles, as a self-administered risk management solution.

Teen Driving Safety
Xemplar Drive – Business is a branded off-the-shelf, B2C subscription-based solution sold through distribution channels such as driving schools or not-for-profit organizations to individuals and/or parents of teens as means to analyze driving habits of themselves, or young drivers as they gain driving experience and develop good driving habits.

About Xemplar Insights

Xemplar products are innovative mobile and cloud technology-based solutions that enable insurers and MGAs to Sell better, Interact better, and Service better, by deploying mobile solutions that delight their policyholders with compelling customer engagement services and smartphone telematics based risk management features.

Xemplar has extended their world class mobile app and telematics capabilities to create products to meet the risk management needs of commercial fleets and families of teen drivers. Today fleet managers and parents of teen drivers have an easy-to-use solution that provides actionable insights into the high risk habits of their drivers.

Xemplar is committed to delivering high quality, feature rich solutions that are valued additions to the lives of users.