Nikhil Kumar is Country Head for India at HERE Technologies
The coronavirus pandemic has made it evident that the risks do not spread in isolation. The effects it has on economies and global organisations are real and clear - interrupting business continuity, supply chains and people movement. As events unfold, we are looking at a ‘new normal’ that will bring fundamental shifts in the way we work, consume and travel across the globe. As people seek to make the right health decisions for business and personal reasons, one can safely expect a rapid adoption of personal and ‘on-demand’ mobility. On the other hand, in the aftermath of the pandemic, businesses impacted by the uncertainty and complications surrounding consumer consumption, are also likely to reassess their supply chains and and building sustainable fleet management strategies.
As countries relax lockdown measures and urban mobility resumes, consumption will eventually pick up, road congestion will return and so will the inevitable increased risks such as traffic tickets, accidents, vehicle thefts and fleet damages. These changes in mobility will put the ‘smart mobility’ back in focus, translating into accelerated growth and opportunities for another ancillary industry: auto insurance. Even before the pandemic, the auto insurance segment formed the largest sector of the general insurance in India. As per a Mordor Intelligence report, premiums from motor insurance in India stood at around 39.4 % of the overall non-life insurance premium in 2018 and is expected to gain from stronger surge in the two wheeler markets.
For insurers looking to ensure business continuity in short term as well as drive profits and competitive differentiation in the long term, aligning business strategy with strong digital transformation framework will be vital. One technology that promises to put back auto insurance in growth mode is location data and analytics. Integrating business operations with location data can enable service providers to assess business priorities and demand thus helping design strategies to navigate tough times. Using location technologies, insurers can foremost address the most pressing concerns of ensuring safety of their employees, agents & distribution partners in the worst affected areas and set up risk mitigation programs for staff who may still need to work on-site.
Analyzing real-time usage-based vehicle movements and understanding where mobility with parked vehicles and fleets has come to a complete halt, insurers can triage emergency response plans, offer premium rebates, policy extensions, cash refunds, renewal credit and discounts to individuals and companies impacted. Another critical aspect of location analytics is that auto insurers can improve accuracy of loss projections and manage material impacts on reserves as insurers and reinsurers look to risk resilience and strong mitigation process. Insurers can thus showcase their own ability to pay future claims and demonstrate the capacity to underwrite responsibly.
Using automotive telematics and many other innovations in smartphone technologies such as GPS tracers, routing algorithms, data rich maps embedded in consumer mobile apps, it is now possible for insurance companies to monitor driving behaviors of customers and accordingly devise ‘usage based insurance’ (UBI) policies and reward good behavior on road through declining premiums and more money in their wallets at the end of the month. Alternatively, customers can use smartphone imagery and recordings using the insurance company’s dedicated app to record any vehicle damages and support their claims. Insurers in turn can apply artificial intelligence to the content to expedite a claim settlement.
Beyond understanding driver behaviors, in-vehicle sensors and connected technologies can also help insurers gain insights on road conditions, measurements of road surfaces and other traffic variables that could inform individual driving behavior and deliver user-based insurance policies to clients. Trackers and AI powered onboard vehicle diagnostics can aid auto- insurers to preempt accidents and hazard warnings thus help lower claims cost, reduce fraud claims, and enhance safety on roads. An apt example of how converging location intelligence with vehicles telematics can be potential game changer for the auto insurance industry is that of Raxel Telematics in Singapore. Traditionally insurers have relied on customers’ claims history and basic demographics. However, using Raxel’s platform, insurance firms in Singapore tracked driver behaviors, safety quotient and risk factors for individuals and logistics fleets. This data was further funneled to create personalized approach to customer acquisition, pricing, retention, and ongoing engagement for insurance firms, while turning a boring financial tool into a fun lifestyle product for consumers in the country.
As is true of any market disruptions, the ongoing pandemic will have long lasting impacts on the automobile industry at large, forcing auto insurers to rapidly evolve as well. As auto companies move from the gig economy and mobility- as-a-service to the age of connected and autonomous vehicles, insurers will have to start tapping into the vast volume of IoT devices and reshape the insurance industry. Armed with location enriched analytics and telematics, insurers will have the ability to produce actionable insights on identifying new customers, underwriting processes, computing policy rates, delivering better products (such as pay per km for smaller insurance amounts), preempting risks, prioritizing response efforts and developing alternative modes of customer outreach.
Embracing location technology will be critical for companies that are looking to better connect and protect their policy holders with fair and data-driven prices, while driving a competitive edge. Ultimately, the ones who succeed will those who drive a rewards-based ecosystem rather than simple pricing adjustments.