Driverless cars may well represent the future of the automobile industry, leaving the insurance industry to grapple with the implications. However, that future may be relatively far off–10, 15, or 20 years from now. The big question for insurers today is how to use the latest technologies available to enhance the customer experience. Auto insurers have a tremendous opportunity to add value for their customers, and to differentiate themselves from their competitors in the process.
One leading example is through telematics–typically devices supplied by insurance companies that snap into the car's dashboard and provide the insurer with information about driver behavior, including miles driven, acceleration and braking patterns, and vehicle GPS data. This information helps the insurer more accurately price risk for individual customers, and can ultimately lower premiums for drivers who exhibit safe behavior. With the average U.S. Auto insurance premium hovering around $1,500 per year, lower premiums can be a significant incentive for consumers to participate in telematics programs.
In a recent global Accenture survey of property and casualty insurance customers, 77% of respondents said they would share information with insurers in return for lower insurance premiums. More than half (56%) of Auto insurance customers said they would share information about the condition of their cars; 52% about their driving habits; and 39% about their location via GPS systems.
In addition to providing behavioral information, telematics can help transform the customer experience. Think about the following scenario: You have just been involved in an automobile accident. You are safe, but in shock. Then reality hits: The insurance paperwork, the meetings with a claims investigator, the time and effort to get a replacement car while your car is being repaired, the struggle to get reimbursed. No matter what the outcome, you are bound to find the process tedious and unpleasant at best, and downright frustrating at worst.
Now, imagine this alternate scenario. The same accident, but, within minutes, a tow truck arrives to take your car to the nearest reputable auto repair shop. Your replacement rental car is ready for you at a convenient location. Had you been injured, an ambulance would have arrived automatically, summoned by the data transmitted from your wearable device.
Within a few days, your car is delivered to your door. If the damage is irreparable, the balance due to you appears in your checking account. All this has happened without you having to make as much as a telephone call.
These capabilities are all part of the so-called "Internet of Things"–a network of connected, intelligent devices that communicate with each other and with service centers. The growth of connected devices–estimated by Gartner Group to reach 26 billion units by 2020, a thirty-fold expansion since 2009–is extraordinary, and it is transforming the property and casualty insurance industry in general and the auto insurance business in particular.
While many insurers have a telematics offering that helps personalize risk assessment and pricing, some more astute companies are using telematics to offer a range of value added services, such as roadside assistance and traffic alerts, vehicle security, and driver coaching.
Vehicle telematics are only the first step to truly connected Auto insurance. Aspirational connected Auto insurers need to excel at creating, motivating and developing an ecosystem of partners, allowing them to offer services that their customers will value. They also will need to re-examine their distribution, rating and claims services. Carriers that want to become connected insurers will need the ability to tap into a range of data from sensors, fitness wearables, and vehicle computers to personalize their products and improve their underwriting. This will mean that big data analysis and better knowledge of customer behavior–leading to more precise segmentation–will be critical capabilities for insurers.
Auto insurers that undertake this kind of transformation will have a rare opportunity to differentiate themselves in a commoditized market. By adding value and providing personalized service–and taking much of the hassle and grief out of filing an auto accident claim–they can build customer loyalty while maintaining profitable growth. That will provide a significant advantage going forward in the dog-eat-dog world of auto insurance. Driverless cars may be coming, but in the meantime insurers need to step up and meet customer expectations for service and convenience.
John Cusano serves as the senior managing director of Accenture's global Insurance practice
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