24 January 2023

Actionable driver risk scoring is the key to profitability for car insurers

Contextualized data boosts competitive pricing and customer engagement

There’s no doubt that the future of insurance is data-driven. But in an industry experiencing profound change, set against a backdrop of economy uncertainty, lean operations have never been more important. Specifically, in an industry obsessed with data, it’s vital that the data is relevant and valuable. Thanks to the latest data analysis and driver scoring capabilities, car insurers can now obtain predictive driver scores for their whole portfolio via a simple GPS data connection, helping to boost competitiveness and profitability.

Relevant driver scoring provides deeper risk insights

Insurance has come a long way. From the traditional model of “proxy” pricing based on factors such as age, occupation, vehicle model, etc., to black boxes and OBD systems, then onto smartphone telematics. But technology doesn’t stand still, and with artificial intelligence (AI) car insurers can now uncover deeper insights that predict the likelihood of crash involvement, crash cost, and environmental impact.

AI is now so advanced it can compare patterns in driving style against billions of previous real-world trips in a similar way to facial recognition. All that’s needed is GPS data obtained via a simple API connection. The resulting insights provide early understanding of risk level across an entire portfolio as well as a projection of future costs.

Risk segmentation opens new doors

From its position at the core of the mobility sector, the insurance industry faces a myriad of challenges, primarily profitability, but also fundamental changes to the enabling technologies. A better understanding of risk unlocks better customer retention, new business opportunities and new revenue streams.

AI analysis and predictive driver scoring enables car insurers to see the actual risk and associated cost of their entire portfolio. In fact, they can quickly identify the 15% of drivers responsible for 50% of collisions because of risky decisions, and the safest, most profitable customers – regardless of vehicle type or geography. This facilitates precision pricing that works hand in glove with proxy rating and provides an entirely new forecasting landscape for underwriters and risk managers.

Data helps car insurers listen to their customers

The customer is at the heart of everything the insurer does, so it makes sense to understand that customer’s usage and actual road risk. Of course, customer needs are constantly evolving. For example, in a post-COVID world in which working from home has skyrocketed, more customers may desire usage-based insurance (UBI) premiums.

Driver scoring that accurately predicts crash risk and climate impact enables car insurers to offer UBI, as well as incentive and loyalty programs, to meet customer demands and strengthen relationships. Rewards or recognition for safer, cleaner driving encourage interaction and help car insurers retain safe, profitable customers.

Car insurers have an opportunity to elevate their ESG strategy

Companies are facing increasing environmental, societal, and consumer pressures. As well as the United Nations’ 2023 Agenda, companies face using value chain due diligence in relation to environmental impact and human rights. Subsequently, the importance of a transparent Environmental, Social, and Corporate Governance (ESG) strategy is growing. As is the need to back up claims with data.

Many industries already offer options that are better for the environment – such as sustainable hotels, green delivery slots etc. – and now car insurers can offer safer, greener insurance solutions. With predictive driver scoring, car insurers can help drivers understand their own risk level and identify their CO2 usage in grams and/or percentage terms. With EV scoring they can even help to optimize battery miles and reduce their charging frequency. Influencing safer, cleaner driving is not only the right thing to do, but it helps car insurers strengthen their ESG strategy and be future ready.

Data is at the heart of an evolving industry

One of the biggest shake-ups in the insurance industry is the entry of new players such as fleet management companies and telematics service providers, who have the potential to overturn traditional insurance pricing.

This needn’t be a threat to traditional car insurers. A partnership between a service provider and an insurer can be a valuable business opportunity. While the service provider benefits by being able to offer added value and an attractive insurance offer to its customers, the car insurer obtains high volumes of corporate customers at speed. It can be a win-win solution, thanks to the power of relevant data.

Please contact Greater Than or book a meeting with me to discover how GPS data analysis can help your car insurance company become more profitable.

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