Rapid advancements in technology have been the backbone of the digitization of various consumer sectors, with an emphasis on introducing improved simplicity and an innovative and tailored service experience.
To meet customer expectations in the digital age, auto insurers are turning to end-to-end digitized insurance plans, tailored to dynamic customer usage and needs.
Studies suggest that the introduction of automation can reduce costs related to a claims process by up to 30%, while insurers can double the profit over 5 years by digitizing existing business avenues. As a result, digitization is changing the way customers interact with insurers and choose services.
Digital insurance supports a customer-centric approach to create more practical and personalized insurance plans, with the spotlight on improved convenience and customer experience. From offering simplified and tailored coverage options and faster claims processing to risk analysis and reduced costs, the concept largely relies on smart software programs and rich vehicle data.
Connected vehicle data, sourced from modern Autonomous, Connected and Electric (ACE) vehicles, monitors vehicle vitals, vehicle performance and driver behavior to identify risk factors that could compromise road safety. For example, by tracking driver historical data related to speeding and hard braking, along with real-time parameters such as speed, location and cell phone usage, insurers could devise insurance plans specific to their exact needs and risk profile. Once the relevant data is collected, AI and IoT technology are used to improve the policy underwriting process by generating accurate driver reports in shorter time frames and analyzing them against current mobility trends for optimal costs.
UBI uses connected car data to interpret insurance costs for policyholders by taking into account how well the driver performs on the road. UBI models evaluate risk profiles based on driving skills and embedded telematics data from connected vehicles to offer customers tailored plans based on their driving skills.
Unlike conventional auto insurance, UBI does not take into account passive factors such as credit scores, number of claims or residence to derive policy costs. Data-driven digital insurance plans such as PAYD (pay-as-you-drive) and PHYD (pay-how-you-drive) leverage UBI concepts to provide drivers with enhanced personalization with minimal effort. The plans allow users with limited driving needs or safer risk profiles to enjoy comprehensive coverage at discounted premiums.
In response to the rising global demand for customized services, auto insurers around the world have shifted their focus from conventional auto insurance to usage-based insurance. So much so that global The size of the UBI market is expected to grow from $19.6 billion in 2021 to $66.8 billion in 2026, at a CAGR growth rate of 27.7%.
Connected vehicle data
With data and connectivity clearly patterned in UBI models, connected vehicle data is undeniably becoming the source of deep data – essential to provide comprehensive coverage to the customers.
UBI programs typically track vehicle mileage and driving habits, monitor risky practices on the road, as well as collisions or accidents. Connected vehicle data, derived from monitoring aspects such as speed, acceleration, hard braking, hard cornering, mileage driven, time of day, phone usage while driving and more, helps accurately assess vehicle live location, breakdown and malfunction events.
The data thus collected provides intelligent insights that enable insurers to offer policyholders tailored plans, improved road safety and new products. While the industry has tried to provide solid UBI models through data from third-party apps or services, in-vehicle data from built-in vehicle sensors really takes things a step further in terms of data richness, reliability, convenience, and cost-effectiveness.
It also eliminates privacy concerns among the current generation of users by sharing their private information and provides a measure of comfort promised by a transparent data sharing process and compliance with global data privacy laws.
Benefits for car owners
Telematics and data provide more than just a far-reaching view of the factors that influence auto insurance.
- Mobility intelligence can reward safe drivers with lower premiums and discounts, in line with their driving behaviour.
- Increased road safety through monitoring of driving behavior and incentive-based techniques to improve driving skills.
- It can also provide drivers with regular feedback on their skills behind the wheel, to encourage an ideal posture on the road.
- Telematics-driven digitized insurance products have the ability to extend accident investigations by reconstructing the sequence of accidents and thereby significantly improving road safety.
- The process also helps auto insurers optimize claims by reducing the time frame for claims propagation and policy renewal, and effectively identify fraud claims.
- Digital insurance sheds light on various vehicle parameters used, including mileage and fuel economy, to help drivers make smart decisions to control overuse and increase fuel efficiency.
- As a result, auto insurers can expect to strengthen their long-term relationships with customers through superior customer experience, personalized plans and value-added services with forward-looking insurance products.