Charles Darwin’s theory of evolution banks on the idea that the species that survive natural selection is not the most intellectual or the strongest but the one that is adaptable to change. This theory holds true even in the current context where industries from all over the world have been trying to equip themselves with the latest technologies to stay in the competition. Digital transformation has been all the rage for quite some time now. Technology and applications have simplified human life further with everyone looking to get things done as quickly as possible. Consumers have also been urging service providers to transition into the digital age. Having said that, one could easily deduce the disruption that has been caused by the latest technologies that are cropping up. Most industries have taken to this change like a knife through butter, with an example being the insurance industry. By automating several of their processes, the industry has been able to save a lot of time and costs which is a complete win for both the insurer and the insured. Our focus right now is on ‘Telematics’, the technology that has brought the insurance companies closer to their customers.
Telematics, The Panacea of Insurtech
In a few words, Telematics is basically the technology that collects vehicle information and transmits it to outside systems, wirelessly. Otherwise known as the ‘Black Box’, it collects information on your driving style including the total mileage, the time you drive, the total number of journeys, driving speed and the like. This information is later on used while calculating the premium for your insurance. Telematics has been a boon for young drivers who are asked to pay a huge premium owing to the stereotype that most rash drivers are young. Telematics helps in understanding the customer and customizing a premium that is suitable for them. The close monitoring provided by telematics helps it easier to determine risk profiles while calculating the premium. Using telematics, most insurance companies calculate the premium methodically during regular periods. The premium thus keeps changing on the basis of the acquired information. As in, safe driving results in a premium discount while rash driving results in an increase in the premium. Also, this gives a chance for the drivers to improve their driving in the next quarter and avail a discount if they had been driving rashly in the previous quarter. The updated version of the black box records a lot of information including the number of stops taken during the journey that aids in the analysis of risk profiles.
Cars on the Clouds
Combined with technologies like Cloud Computing, Telematics could go a very long way. With telematics acting as the front-end and cloud computing as the back-end, gathering and storing data would be a cushy job. Moving to the cloud would enable the creation of computer resources without much hassle. Once they are created, SaaS solutions enable quicker deployment than with the traditional software. Also with its pay-as-you-go scheme, one could cut down on the costs by reducing the cost of ownership of infrastructure. Highly populated urban environments have generated a need for technologies that are efficient, safe and better equipped and ultimately the rise of IoT. Thus advanced telematics solutions are built upon these needs. The current telematics environment is programmed to track performance and not just the behavior patterns and this, in turn, fulfills the growing safety concerns of the public. Cloud and IoT have reprogrammed telematics solutions to be safer and much more advanced than it had been before.
Real-Life Applications of Telematics
An insurance company based in North America had faced a business crunch in 2013 as the automobile-insurance market hit a new low. This urged them to offer customized premium according to different customer groups. This could have been made possible only with close monitoring of the driving habits of the customers. The company chose a technology partner to devise an innovative and real-time driver monitoring system. The data collected by the device was deployed and delivered through a cloud service. Ultimately this switch-over helped the organization to focus on their profitable customer groups and tailor the company’s offerings according to the customer group it services. Another case study is that of a UK based logistics company. The organization, that had acquired around half a dozen businesses faced the challenge of integrating their systems with their existing technology. After investing in a single telematics system across the business, the organization could manage their drivers better. Thus, they started experiencing better MPG, lesser maintenance costs and reduced level of accidents.
Coming back to the analogy that I began with, insurance industries should focus on the growing trends around telematics if they need to understand their customers better. Being an industry that is closely dependant on the needs of their customers, if they do not adapt to the changes that IoT has been bringing to the world, they will get left behind no matter how strong or smart they are!
Radhakrishnan NR, Fintech Practice Head, RapidValue
Amritha Nampalat, Marketing Analyst, RapidValue