Episode #9 – Why do insurers think Connected Car insurance is so difficult?

I started these Connected Car insurance episodes with – “Getting C-Suite engagement”; this is a key component of ensuring innovation within the sector prospers and delivers better for customers and insurers.??

In the subsequent episodes, I have covered a lot of material about AI enabled Viaduct Connected Car insurance and the game-changing aspects of the proposition.?However, I am left with a puzzling question – Why do insurers still think Connected Car insurance is so difficult?

This is a tough question to answer, because there are a number of factors, not least the restrictions of legacy systems and inflexible business models. It does not need to be so difficult.

I readily accept that there are many barriers to creating and building a new insurance business, particularly one using new technologies and processes.?I also appreciate that motor insurers have since the pandemic had to face many challenges, in order to deliver an acceptable level of customer service.?Some insurers have made good progress with digitalisation and better self-service functionality.?However, in an increasingly connected world, motor insurers cannot afford to delay investing in Connected Car insurance.

In this series of articles, I have wanted to show how Connected Car insurance can work and deliver a superior customer experience, as well as a better loss ratio.?

I see too many insurers focusing on the cost of the devices and the related tech services and too few examine the benefits. ?This approach is short-sighted and to the detriment of the customer and themselves, because it limits the benefits and hampers the ultimate profitability.

So in this episode it conveniently brings us back, ?full circle, to episode 1, when I wrote:

‘To build a successful telematics / connected car proposition today, you need to be prepared to change your thinking and be clear on how to use the technology’

1. create a culture driven by innovation, challenging legacy thinking, geared to be agile and proud to be a disrupting force
2. deliver a superior customer experience such as providing a dynamic accident management support service
3. build new products such as Pay As You Drive or Pay How You Drive and in turn, this means being able to price based on the actual driving experience rather than relying on a set of proxy factors

Telematics on its’ own will not deliver a superior loss ratio.?You have to build a new business model with telematics / connected car at the centre and then, use other enabling technologies and capabilities to be successful’

I recognise that developing a business with these characteristics can be tough for an existing insurer who has to overcome many internal ?challenges.?For many of these insurers, post-pandemic, there has been little appetite for ground-breaking innovation like connected car insurance as they have adjusted to new ways of working.

Many industry experts talk passionately about data – ‘it is all about the data’ they say.?Yet, too many motor insurers still do not invest in telematics or connected car solutions.?This means they do not have the level of driving data they need, so they don’t ?know how their customer is driving, and they are not taking steps to engage with their customer and explore ways to encourage the customer to drive safely.?They are not optimising the data or the customer relationship.

If insurers genuinely believe ‘it is all about the data’, then accessing more data will require the business to be structured and behave differently, in order to maximise the use of all this data.?This means a change of mind set, culture and organisation, as well as a programme of up-skilling.?

The Way Forward

Throughout these episodes I have explored both how connected car insurance works and what are the challenges and the benefits??

At this stage, it is important to highlight that in calling a ?proposition ‘connected car insurance’ does not make it a connected car proposition as you need to have all of the capabilities I have described in these episodes, not just some of them, that are available with 1st generation telematics.

By accepting that Connected Car insurance is difficult, then how can an existing insurer move forward and embrace connected car insurance??In episode 1, I described the options and how Viaduct are in a unique position to ?help ?insurers create a new business model without damaging the existing motor portfolio.?Given the increasing media focus on the escalating cost of UK motor insurance, this is a solution which will help combat the rising costs and show the industry can make a real difference for customers.

Episode #10 – our concluding episode in this series of articles.