Tag Archives: market segmentation

Telematics: Because Accidents Happen

As I researched recent developments in the telematics space, I thought of the wise words of an unknown car driver: “The worst fault of a car driver is his belief that he has none.” Whenever I speak to a group on telematics, I ask the audience, “Who considers themselves to be a better than average driver?” Every time, at least 80-90% of the hands go up.

Even if we are all close to perfect drivers, accidents will still happen. And telematics data can be used to help identify who is at fault.

Claims handling might be the new frontier for telematics, in general; beyond the early adopters of telematics-based pricing, many insurers have run pilots and proofs of concept with telematics in areas such as product development, underwriting, new business and market segmentation. They have gathered insights and developed telematics-based solutions for the broader market, often with the support of increasingly sophisticated telematics solution providers in technology or data and analytics. In fact, the SMA 2015 report, “The Changing Auto Insurance Landscape: Influencers Driving Disruption and Change,” revealed that, since its introduction to the market in 2010, telematics has come to be recognized as a maturing rather than emerging technology and often gets incorporated into connected car initiatives. The study also discussed how the industry is starting to investigate even newer technologies that might affect the auto insurance market, such as shared transportation and the autonomous vehicle.

However, it would be a mistake to move on to newer technologies and initiatives without further considering investments in telematics, especially when the full business value of telematics offerings may not have been reached yet.

Right now, particularly in personal lines, telematics is used primarily for market segmentation, product and underwriting purposes. There is a growing appreciation, though, of the value of telematics in claims handling beyond accident avoidance and driver education. For example, at a recent LexisNexis/Wunelli insurance event, it was demonstrated that telematics can play a key role in claims investigations by helping to determine which party is at fault – not always a clear-cut matter. In the specific accident discussed, two cars hit each other in the parking lot of a supermarket. The physical damage did not give a clear picture of who was at fault, and the drivers disagreed in their statements about what actually happened. One of the cars involved, however, was equipped with a telematics device. At the request of the driver of this car, the insurance carrier was able to analyze the data on the location and speed of her car immediately preceding this accident. This analysis made it abundantly clear that the driver of the telematics-equipped car could not have been at fault, which provided the insurer with proof to settle the claim accordingly.

I found it even more shocking that it was the insured driver who actually had to point out to her insurer that telematics data was available and that access to that data could be of great help in handling this claim. It was obviously not standard procedure for this specific carrier to look at telematics data in the claims handling process – and in this case, without the driver’s suggestion, the opportunity would have been missed.

Unfortunately, I don’t believe that this carrier is unique. I would urge personal lines carriers, in particular, to consider the uses and applicability of telematics data outside of the market segmentation, product and underwriting functions. We can all learn from examples like this one, as well as from the commercial lines telematics applications for risk management and claims handling.

Because we all know that, even though we drive better than the average driver, accidents still do happen.

The End of Market Segmentation

IBM’s CEO Ginni Rometty’s speech a year and a half ago giving marketers 18 months to “sink or swim” raised a few eyebrows, and her deadline is upon us. She defined three imminent waves of change:

Wave 1: The shift from the market segment to the individual. It spells the death of the marketing to the “average customer.”  With the right data, you can do things like real-time pricing.

Wave 2: The evolution from reaching out to customers to creating a “system of engagement” that keeps track of interactions between brand and customer and uses insights at every touch point.

Wave 3:  Data is used to personalize interactions and provide the right context.

Telling words, indeed, if you are a marketer who hasn’t gotten on the big-data bandwagon. For insurers, these words have a chilling relevance. Let’s see how these three waves can be adopted by insurers, especially in the healthcare space:

1.  The shift toward individualized marketing is already in full swing, primarily because of healthcare reform, and its main enabler is data — mostly structured data, because insurers are still not ready to fully embrace big data. The more accurate and timely information an insurer can collect on an individual member’s interactions with the healthcare system, the more realistic its performance evaluation by the government. Of course, data-savvy insurers won’t have to wait for the government to identify gaps in the delivery of care and will work toward closing them. One doesn’t need the foresight of IBM’s CEO to predict that these insurers would be in the best position to squeeze competition out of the marketplace.

2.  A system of engagement is also in various stages of existence at various health plans to closely monitor interactions between their members and providers and to manage aspects of the members’ health through programs for case management, disease management, etc. Those familiar with care management would readily recognize the role that predictive modeling plays in identifying and prioritizing candidates. We all know that without the right amount and quality of data, such models are useless. In the coming years, the scope of care management is only going to broaden, simply because the industry has shifted from a model of reactive interventions to proactive care management.

3.  The idea of personalizing care more for the individual (or families) has been around for a few decades already. If you look at patient-centered medical-homes, you can see that the industry is already working, albeit slowly, to realize this vision. Ideals such as continuous and integrated care, seamless coordination and communication and constant improvement all rest on the effective use and exchange of information (structured and unstructured) among the various stakeholders.

It’s safe to conclude that the three waves are already upon us in the healthcare industry. Some insurers will ride them more effectively than others, because they will be able to harvest so much information — from electronic medical records, lab results, X-rays, MRI results, even genetic data.

Setting a hard and fast deadline might be a bit presumptuous, but it isn’t too hard to predict that it won’t take more than a few years to transform the role of big data from a luxury to an absolute necessity for them!