Thomas Djursoe, Country Client Partner, Denmark, Cognizant

OREANDA-NEWS. November 26, 2015. “Rapid developments in connected car technology and an EU traffic-safety initiative, which will be implemented across Europe, are set to make the next couple of years an important period for the car insurance industry,” says Thomas Djursoe. “The stage is set for innovative car insurance companies to develop more meaningful and mutually beneficial relationships with policyholders.” Excerpts:

“The usefulness of data is obvious in auto/motor insurance, where the advances in machine-to-machine (M2M) communication, or telematics, are generating data to more precisely assess risk and reward for policyholders. This data, what we call “Car Halos” and which surrounds each driver and vehicle, can provide great insight into customer behavior, preferences and needs.

Telematics-supported insurance is disrupting the traditional auto insurance business model and can benefit both insurers and consumers by resulting in better risk assessment and incentive-based “pay-as-you-drive” programs. More sophisticated risk models, where the use of analytics is applied to user-specific data, will yield a more precise driver profile.

This represents a huge change from traditional policy underwriting models, where risk is assessed and premiums determined based on stereotypical group behavior and proxy variables such as credit scores, post codes and even gender.

For insurers, telematics-based insurance presents a valuable opportunity to reduce costs through data-driven pricing and pass discounts to customers. With telematics-based insurance, an 18-year-old driver could see his or her €1500 per year premium reduced by more than €400.

Additionally, telematics allows both insurers and automakers to develop new supplementary revenue channels and add-on connected-car services such as in-car entertainment, WiFi, real-time navigation, and emergency and roadside assistance.

Data-driven insurance policies that encourage safe driving behavior can result in fewer accidents and help insurers reduce cost of processing claims. With more accurate accident data available in real-time—combined with geospatial data on road conditions and other factors—insurers can more accurately and efficiently settle claims, detect fraud, offer immediate assistance and provide detailed accident information to emergency services.

By embracing and maximizing the business potential that telematics technology can generate, carriers can retain customers and acquire new ones from competitors who have not yet adopted such a strategy.

With the proliferation of sensors in connected cars, the net benefits of telematics-based products will outweigh investment and processing costs incurred.”