Enticing consumers to take the plunge and allow their drivingperformance to be monitored via telematics is only half the battlefor carriers transitioning to a usage-based auto insuranceprogram.

The other half is retaining those accounts by convincingcustomers not only that telematics could result in lower premiums,but that it can also pave the road to deliver a new set ofvalue-added services.

Indeed, while the potential for a discounted premium may beimportant to achieve initial consumer adoption, telematics can beleveraged to create a much deeper level of engagement asusage-based insurance (UBI) moves beyond its nascent stage,resulting in a more beneficial customer experience.

That's the 'Holy Grail' for insurers—establishing brandstickiness by offering ongoing value to policyholders beyond theprice charged for coverage and any claim services provided.

To differentiate themselves with telematics, UBI carriers arealready offering a number of valuable features, including:

• Immediate feedback on how customers could drive moresafely.
• Alerts about potentially hazardous road conditions or trafficslowdowns.
• Roadside assistance and/or immediate claim notification in caseof an accident.
• Location of lost or stolen vehicles.
• Geo-fencing to allow parents to monitor a teenager's locationand driving behavior. (The same service could be offered to thoseconcerned about elderly drivers.)

Carriers might also consider capitalizing on the location-basedcapabilities of their telematics connection by working with relatedservice providers to steer policyholders towards the nearesttowing, auto repair, and car wash facilities. They could even offeraccess to information about restaurant, retail, and entertainmentoptions in the driver's immediate area.

Making insurance 'fun' with telematics

Taking this a step further, gamification—that is, theapplication of gaming concepts to a broader commercialexperience—might also be channeled through telematics to furtherenhance the customer experience and spur greater loyalty amongpolicyholders.

Insurers could provide reward points for improvements in drivingbehavior, relative to their own performance as well as against abroader or more targeted policyholder pool. In this way, telematicscould make the policyholder's relationship with their auto carriermore interactive, gratifying, and perhaps even fun—certainly not anattribute traditionally associated with insurance!

A big part of “gamifying” insurance would be to provide regularincentives for behavior that prevents losses, thereby generatingvalue for insureds and carriers alike throughout the policy year.This would make auto insurance more of a proactive,prevention-driven engagement, rather than a reactive, price-drivencommodity.

Such incentives could go beyond any premium discounts and boostsin deductibles. Indeed, “players” in the insurance “game” couldearn reward points if they drive in a way that limits risk andprevents losses, based on telematics monitoring. For example,carriers could set up a weekly or monthly safe driving competitionamong friends or colleagues insured by the same company (whichcould perhaps provide an incentive for policyholders to referothers to their carrier).

Perhaps the points earned could be directly redeemed not onlyfor traditional insurance benefits, such as lower deductibles orhigher limits, but to trade on affinity relationships with vendorsboth related and unrelated to driving.

Through gamification, insurers might establish an ongoing, moremutually beneficial relationship with policyholders, rather thanrelying on price or claims service alone to compete. As a result,consumers may be less tempted to change carriers at renewal basedon a somewhat lower price offered by a competitor, if it meanshaving to surrender the reward points they have built up, as wellas no longer being able to play the particular “insurance game”offered by their provider.

For more information about telematics, including a recap ofDeloitte's consumer research into the market for UBI, see “OvercomingSpeed Bumps on the Road to Telematics.”