Telematics – Selling a Better Mouse trap

Auto insurers continue to advance usage-based-insurance (UBI) programs by leveraging telematics technology to sample or monitor actual driving behavior. Although telematics has been around for more than 20 years, consumers remain hesitant to adopt the technology. This is evidenced by the fact that the vast majority of drivers currently opt for traditional auto insurance policies.

The application of telematics is designed to help drivers save money, improve safety and potentially change driving behavior. However, much of the attention is devoted to attracting new customers with the prospects of lowering premiums by matching individual driving behavior with traditional underwriting practices which include credit scores, driving record and primary garaging location, to name a few. The priority on saving money is understandable since consumers generally shop or switch to save. Given the high cost of premiums, especially in metro markets or for those with the misfortune of moving violations, at-fault accidents or household youthful drivers, it certainly makes sense for insurers to emphasize savings. Factor in a highly competitive auto insurance marketplaces where the top-10 insurers are slugging it out for market share, it is easy to see what’s happening. Finally, while safe driving and behavior change may be at the core of telematics insurance programs both may be harder to explain and convince consumers of their value. Thus, selling based on savings is practical but not necessarily optimal as you’ll see.

Following the Covid19 pandemic, insurers raced to refund premiums in recognition of steep declines in driving and the related decreasing exposure – at least temporarily. This event has raised awareness around the topic of paying for actual usage or at least the extent of use. And it’s not a stretch to question why my premiums do not consider my driving behavior rather than being lumped into a particular cohort or simply based on credit scores. After all, I am a good driver.

Such awareness has stimulated the marketplace and several new insurers have joined the ranks of UBI. Mercury Insurance just announced MercuryGo a telematics UBI app policy in Texas. Advertising for safe driving discounts have been on the rise. Allstate’s Drivewise, good driver discount telematics policy is just one example. Lexis Nexis launched Telematics OnDemand which leverages consumer’s driving behavior data as part of real-time quoting. In turn, enabling insurers to offer premiums based on established driving scores. Root Insurance which relies on telematics to attract “good drivers”, recently went so far as announcing plans to eliminate credit scores from their pricing model scores by 2025

With all of this activity afoot, it still comes down to consumer adoption and the importance of point of sale. I recently spoke with Brian Ahearn after reading his article Selling Telematics: A Little Psychology Goes a Long Way which was featured on Agency Nation. He shared how best to introduce the product in order to experience greater success from the Insurance Agent point of view. Brian has deep insurance, underwriting and sales knowledge having spent more than three decades in the industry. He combines that experience with being one of only 20 Cialdini certified trainers in the world. Robert Cialdini is the most cited living social psychologist on the planet when it comes to the science of influence. Brian’s article does a great job of explaining context and he was able to further explain.

I asked Brian to react to the current view in which auto insurance is bought but seldom sold.

Brian, it is true, insurance has become commoditized. To some extent agents have let that happen by placing the CSR in charge of personal lines while agents focus on commercial accounts.

Insurers have contributed too because most of their advertising revolves around saving money. People don’t know what they’re buying and assume all policies are the same. When that’s the case, why wouldn’t you just look for the cheapest policy?

I am familiar with your work around Pre-suasion but can you explain it in simple terms? 

Most people are familiar with persuasion: getting someone to do something they would not ordinarily do on their own. Pre-suasion is a little different. It’s all about setting up the moment before making the ask. Brian describes his engagement to Jane (now married for 32 years), on her birthday he sent roses to work, showed up at her apartment before dinner with more flowers and wine. He rented a Rolls Royce to take her to a special restaurant, one of the tallest buildings with a beautiful view of the city. On the way home he popped the question and she said yes. You see, he “set the stage” so to speak which made her decision to say yes much easier than if he’d not pre-suaded her.

How does Pre-suasion apply to selling insurance, specifically introducing telematics or UBI?

Asking a person, “Are you a good driver,” changes their thinking. Research says most people believe they are better than average when it comes to positive traits. But we can’t all be better looking, smarter, kinder, etc., than average. The same logic holds true when you ask if someone believed they’re a better than average driver. Once someone says, “yeah, I am better than average,” the question becomes; then why pay more than the average driver for insurance?

Why does this approach work so well and can it be applied elsewhere?

In one research study people entering a grocery store were asked for their email address in return for the promise of an email with coupons for free samples of a new type of pop. Under that condition one third of store goers gave their email. With another group three fourths gave their email address when asked the same question. Why such a huge difference? Because the second group was pre-suaded with this question first: Do you consider yourself to be adventurous, the kind of person who likes to try new things? Nearly everyone said yes to that initial question. Then, when asked about trying the new pop, they’d convinced themselves they were the kind of people who liked to try new things. It was only consistent at that point to willingly share their email address so they could try the new product. 

Take that first step by asking about - “better than average driver” - then get into the technical questions once the customer is motivated and willing to try it.

What is missing right now?

Insurers are advertising. Ads create awareness but don’t address that drivers don’t want to be tracked. And, they almost never talk about people paying more than necessary. Instead they keep beating the drum about savings. 

Imagine I tell you that you could save 15% by switching insurance. You’re somewhat motivated to do that because saving money is nice. But, you don’t necessarily feel worse off if you don’t switch.

Now imagine I tell you that you’ve been overpaying on your insurance by 15%. You don’t like that and the research is clear; people are about twice as motivated to avoid losing versus gaining the same thing. 

Bottom line; the agent who gets a customer to acknowledge they’re a better than average driver then alerts them to the reality that, being better than average, they’re overpaying, will have many more customers willing to try telematics.

How can you help agents utilize and make a difference?

I work with insurance companies and agencies teaching them about the science of influence and how to apply the research in order to optimize their results. Selling telematics is just one way I do that.

As Telematics is believed to be a better and fairer way of charging drivers for auto insurance – a better mouse trap – how insurers go about selling it can make all the difference.