Customers remain unclear on what data and factors determine their auto insurance price. In fact, they are even less clear now on how those factors are used to determine their price. Today, even more data is available to insurers to assess risk—and it may well prove to be better at assessing risk than ever before—but customers are trying to catch-up. Do we go back and try to better explain the past, or do we forge forward and include them in the new conversation?
As an insurance carrier, why care? The industry COR is already close to 100%. We’re not that bad at pricing, but addressing what customers want may lower that ratio even further. Customers want to understand what data is being used, who gave permission and how using it is beneficial. Discounts don’t seem a feasible option for now, and it may not matter. When given the choice between increased safety and discounts, customers choose safety which should lower CORs…
The second volume of our Insurance Emerging Technology (IET) study, focused on Digital Underwriting, finds there is perceived value among customers in transitioning what an insurance company does from covering the cost in the event they have a claim to helping prevent the loss to begin with. Reducing the risk of an accident by sharing data-driven driving tips trumps discounts in terms of customers willingness to share data collected by their vehicle. Half of customers would change their behavior if they found out they were only 3% more at risk than other drivers. Compare that with only 32% of customers who would change behavior for a 3% discount. Only when the amount of the discount reaches 20% does the discount become more important than risk in changing behavior. Increasing safety is an optimal value proposition for all parties involved and influencing customers’ driving behavior could have a major impact on insurer loss ratios. There is no better claim than the one that doesn’t happen.
Learn more about the new 2019 Insurance Emerging Technology Study >
