Nordic Capital Bets on Digital Payments Backing InsurTech One Inc 
Many telematics programs have relied on a smartphone app to collect driving data. Thanks to the rise of connected cars, this is changing. According to Digital Insurance1, almost all new cars have connected systems that collect data on how and where the car is being driven. Connected cars could increase telematics adoption, transforming the insurance industry in the process.
Commonly cited barriers to telematics adoption include privacy concerns and technology limitations. These are real challenges, but there’s another notable challenge: drivers may be reluctant to switch to telematics insurance if they see it as a hassle. For policyholders to adopt telematics, they need to perceive the savings as worthwhile.
As connected cars become the norm, telematics programs will become increasingly convenient. Digital Insurance1 says partnerships between automakers and insurance carriers have been increasing, which is leading to more telematics options based on capabilities built into connected car platforms. Furthermore, Digital Insurance says automakers are presenting these insurance options at the point of sale, which makes the option even more convenient.
In a recent article on telematics adoption, we discussed how telematics could help make our roads safer. Telematics programs that use connected car capabilities may have the biggest impact.
This is especially important for young, inexperienced drivers because they are particularly vulnerable on the road. The CDC2 says the risk of motor vehicle crashes is highest in the 16-to-19 age group. Per mile driven, teen drivers are in fatal crashes almost three times as often as drivers aged 20 and older. In 2020, approximately 2,800 teens were killed in motor vehicle crashes and about 227,000 were injured.
Many states have passed restrictions for teen drivers and parents may create their own restrictions, but teens may not always follow these rules. Kelley Blue Book3 says telematics can help parents make sure their teens are staying safe behind the wheel. If teen drivers break the rules – for example, by speeding – the parents can receive an alert. Parents and teens can review driving data to discuss how to improve and stay safe on the road.
Kelley Blue Book says some car makers, such as GM, have developed telematics programs specially for teen drivers.
Having telematics programs built into a connected car may be especially attractive to parents. Teens may forget to turn on their telematics apps – or pretend they forgot – but smart cars always collect data.
Telematics technology isn’t just about driver behavior: it can also help with proactive vehicle maintenance to reduce long-term maintenance costs and downtime. Since vehicle malfunctions can contribute to crashes, proactive maintenance may also help keep drivers safe.
Work Truck Online4 says telematics solutions can improve fleet maintenance by relieving drivers of some monitoring and reporting burdens.
AI-powered telematics systems could even make cars more sustainable. According to Verdict5, virtual sensors for connected cars could improve efficiency and sustainability. For example, a sensor that measures the tread depth of a tire can predict when the tire will reach the end of its life.
Because the effectiveness of an insurer’s telematics program hinges on accurate data, telematics insurers need as much data as possible. In the 2022 LexisNexis U.S. Auto Insurance Trends Report6, 60% of survey respondents said telematics apps produce incomplete and limited data, which makes insurers less confident in the data and its risk assessment capabilities.
Connected cars, however, can provide the data insurers need to take their telematics programs to the next level. They could even change the very nature of insurance.
As cars become smarter, more connected, and ultimately more autonomous, original equipment manufacturers (OEMs) will start to play a larger role in insurance. In fact, this has already begun. The Digital Insurance1 article discusses how automakers have been partnering with insurers to create point-of-sale telematics insurance options.
According to McKinsey & Company7, the future of OEM–insurance carrier relationships could go one of four ways:
Insurers have some choices to make. They can stick to traditional insurance or they can embrace telematics adoption. They can hold onto the status quo or they can form new partnerships and alliances. The decisions made now will determine what happens next.
And in addition to considering telematics adoption strategies, insurers need to consider their digital payment strategies – for both the short term and the longer term. At One Inc, we not only deliver fast and secure digital premium and claim payment options, we also deliver the innovation and value that propels insurers forward. Learn more.
Sources:
Tags: Auto Insurance
