The next wave of innovation is sweeping the insurance industry as customers look for more personalization from their insurers. As policy needs and driving behaviors vary from customer to customer, there is no single perfect package. Customers demand personal treatment, and technology gives insurance providers the opportunity to follow suit. But, the more companies that move toward personalization, the more difficult it will be to stand out.
Just weeks ago, Root Insurance – a startup that offers customers a personalized auto insurance experience – sped up this transition with its latest round of funding and a $1 billion valuation. This heavy investment in behavior-based insurance (BBI), or rating consumers on their driving performance rather than factors like zip code or credit score, certainly won’t be the last. Other small startup insurance companies offer their customers a more tailored and personalized plan, as well. But will these smaller companies lead the industry into broadly applied personalized insurance models? Or, will major insurance companies with large-scale credibility and longtime reputation come to the forefront? Smartphone telematics, big data, and AI-powered analytics enable legacy companies with an extensive outreach to truly disrupt the industry. These longtime players can offer the personalized experience as well as the credibility and resources to shift the entire insurance landscape in a new, digital direction.
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A personalized experience with a reputation customers trust
As we’ve seen extensively in e-commerce and marketing industries, customers have come to expect brands to know their habits and to adapt purchasing and engagement experiences to fit their personal preferences. While it is a relatively new trend for the auto insurance industry, it will continue to grow over time.
Customers do not want to be treated as a statistic any more, with their premiums based on credit score or geographic location alone. In fact, 73% of drivers surveyed said that they’d prefer insurance rates be based on their driving behaviors. Smartphone telematics solutions allow insurers to easily receive customer data that provides insight on an individual’s driving habits and performance, providing the necessary information to more accurately stratify risk and deliver more personalized, regular consumer touchpoints and – in some cases – behavior-based rates.
Out of the 10 largest U.S. insurance providers, nine claim to be, at the very least, testing forms of smartphone-based telematics programs. The various use cases include building better risk and pricing models, offering behavior-based discounts and rewards and providing feedback and gamification to motivate customers to become better drivers. Not only do these use cases benefit the customer, but also the insurance provider.
In the auto insurance industry where the top three providers make up 41% of the market, and the top 10 take 72%, there needs to be a clear differentiator for companies to win more business, retain top customers and establish themselves as leaders. Smartphone telematics is one way major insurers can differentiate themselves in consumers’ eyes. Better pricing and longer-term improvements in driver behavior will drive higher retention and new business while accident detection, faster claims and higher levels of positive customer engagement will enable them to take on a leadership role.
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Many new startups are basing their platforms on providing customers with a tailored experience, but the top insurance companies have the most power to affect change in a congested, commoditized environment. The future is promising with the growing popularity of smartphone telematics, enhancement of IoT solutions and our ability to glean insights on personal driving behaviors from large quantities of data. These technologies and capabilities have the power to further advance personalized insurance experiences and help insurers increase profitability. The insurer that embraces the end-to-end technological innovations available will be the ultimate standout, creating a customer experience that is seamless, efficient and human.