The great savior for mid-tier and smaller insurance carriers inthe past decade has been the Web. Regional insurers could suddenlydo business in the same manner as national carriers and customersfound it nearly impossible to distinguish between the two. Life wasgreat for these smaller insurance companies.

Alas, life rarelystands still, particularly when it comes tofinding better ways to do things—quicker and less expensive—thanyour competitors. Midtier and smaller insurers are once againreminded of their status as their larger competitors are findingeven more ways to operate effectively through the use of predictivemodeling.

Telematics, one form of modeling, has become a game-changer forinsurance carriers operating in the personal auto line. Soon, itwill become impossible for those without this technology to competefor the good drivers of the world with larger carriers. Gooddrivers have long been saddled with less efficient underwritingtools that lump their rates together with less careful drivers,pushing the rates of better customers higher despite fewer drivingmishaps.

Towers Watson recently issued a report on predictive modelingamong p&c insurers and reported some incredible data. Whenlooking at their bottom lines, 83 percent of carriers surveyedreport a positive impact on rate accuracy through predictivemodeling.

If that wasn't enough, 76 percent report a positive impact onloss ratio and 73 percent report a positive impact onprofitability.

This survey crossed both personal and commercial lines, but it'simportant to remember that personal lines carriers, particularlyones that have moved, however gently, into telematics will likelyhave higher expectations than even those numbers mentionedabove.

According to Towers Watson: “Currently, personal linesrespondent carriers that use telematics are focusing on only a fewareas, including measurement of annual mileage, tracking how andwhen a vehicle is being driven, who is driving the vehicle, andwhere it is being driven. But more expansive plans are underway: 89percent of personal lines respondents that either use or plan touse telematics have plans to use the data proactively in rating and83 percent plan to use it to provide information to insureds tohelp improve driving behavior.”

The race to use telematics will likely be a quick one. Informeddrivers who realize they can get better rates because they havebeen and continue to be good drivers will seek out those companiesthat offer telematics, while companies without the technology willbe stuck with the rejects from demolition derby. Which carrier doyou want to be?