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The many types of telematics-based insurance

With the majority of millennials interested in a usage-based insurance (UBI) policy, and 84% rating UBI policies as a more fair way to price insurance, telematics represents a major opportunity for insurers. Most US telematics programs offer some variation of a good driving discount program. Telematics can support a much broader range of programs, allowing insurers to profitably enter new and niche markets.

Telematics-driven insurance products are generally broken into two categories: pay how you drive (PHYD) insurance and pay as you drive (PAYD) insurance. Below are just a few examples of new products insurers can bring to market through telematics.

Pay how you drive insurance

PHYD insurance is primarily focused on using driving behavior to assess risk and price premiums. There are several new products insurers can offer that fall under PHYD insurance, ranging from programs aimed at safe drivers in general, to those focused on niche or underserved audiences. In all cases, these products are aimed at improving pricing models for drivers who are lower risk than traditional rating models would suggest.

  • Good driving discount 
    Drivers receive an initial premium discount at time of purchase, plus the offer of a greater discount for good driving behaviors. Insurers monitor driving behavior and adjust premiums based on observed risky behaviors.
  • Teen driver insurance
    Teen driving discount programs similarly monitor driving behavior to reduce traditionally high premiums for young or new drivers. These policies do not generally offer a discount upfront, but instead reduce premiums for drivers who prove they are safest.
  • Accident forgiveness insurance
    Accident forgiveness programs allow drivers who are categorized as high-risk to lower or eliminate premium surcharges from past at-fault accidents, speeding tickets, or minor violations. Driving behavior is monitored and premiums are adjusted if low-risk behavior is observed.
  • Safer driver acquisition
    These programs use telematics to identify safe drivers prior to allowing them to purchase a policy. Driving behavior is monitored for a set period of time and only the safest drivers offered a low-cost policy. Less safe drivers may either not be offered a policy or be pushed to another product.

Pay as you drive insurance

One of the most significant risk factors is simply a matter of how much you drive. PAYD insurance is primarily focused on accurately monitoring mileage driven and pricing policies appropriately based on that mileage. PAYD programs enable several new products ranging from low-mileage discounts to short-term and on-demand products.

  • Pay per mile insurance
    Pay per mile insurance policies generally follow one of two models: a bulk mileage purchase followed by a cost per mile or a straight cost per mile policy. In either case, miles driven is the primary driver of policy cost. Telematics allows insurers to accurately monitor mileage in near real time and helps combat mileage reporting fraud.
  • On-demand insurance
    On-demand insurance allows policyholders to drive any car for a period from hours to days. Using telematics, insurers can verify time, mileage, and location to ensure that drivers do not deviate from purchased protection.
  • Mileage verified insurance
    Telematics provides insurers with a transparent way to verify mileage in near real time. This type of mileage verification allows insurers to adjust policy premiums up or down during the policy period or upon renewal.

Provisional versus permanent

For many types of telematics programs, insurers can define the telematics monitoring period, either provisional or permanent:

  • Provisional: Policyholders are serviced for a set period of time (typically 30-90 days). After this period is over, drivers ‘graduate’ and get their final premium.
  • Permanent: Policyholders are continuously serviced over the life of the policy.

Although provisional programs are more common, there has been a surge in permanent programs as insurers explore the benefits of telematics-driven claims and value-added policyholder services such as preventive maintenance alerts, geofencing, and curfews.

For a look into how insurer carriers in the US are using telematics today, along with the barriers to and benefits of telematics adoption, download our white paper, The State of Insurance Telematics.

Octo has over 15 years of experience designing and delivering telematics solutions around the world. Our portfolio of insurance telematics solutions support all of these insurance as well as other, custom-designed programs.

Contact us to learn more about our solutions and how we can help you bring a telematics-driven product to market.

Value, Not Discounts, Key to Commercial Lines Telematics

Over the past year, Octo has seen significant interest in telematics solutions for commercial auto insurance. As insurers start seeing results from their personal auto usage-based insurance programs, they look for new ways to leverage telematics technology. With half of the 13 million commercial vehicles in the U.S. connected via telematics, bringing telematics to commercial auto insurance is a logical next step.

Price-based competition in commercial auto insurance has been a major driver of increasing combined ratios over the past few years. Often in our discussions with insurers, we come to the same sticking point — with record high combined ratios, they cannot make the business case for offering significant discounts to their commercial customers in exchange for telematics data.

Click here to read the full article.

Octo’s Cletus Nunes addresses the shifting mobility landscape

Octo’s Cletus Nunes sits down with IoT Time podcast series host Ken Briodagh to talk about the shifting auto insurance landscape. They explore the need for insurers to develop core competencies in data and analytics, how changing mobility habits will impact insurers, and telematics as the foundation for the future of auto insurance. Listen to the full podcast below:

https://soundcloud.com/kenbriodagh/iot-time-podcast-s3-ep2-octo-telematics

Telematics Drives £160 Million Savings in UK

Telematics insurance policies provide UK drivers with net savings in 2017

Octo Telematics, the number one global provider of telematics for the motor vehicle insurance industry, has released data revealing that, in 2017, drivers in the United Kingdom saved approximately 160 million pounds in car insurance costs through the adoption of usage-based insurance policies – an average saving of 167 pounds for every driver in the country.

Telematics Insurance

Telematics insurance policies are rapidly increasing in popularity across the United Kingdom and many insurers are now able to automatically offer discounts of up to 20% to their clients. According to the Confused.com UK car insurance price index, vehicle insurance costs reached an average of £838 in the third quarter of 2017, while Ptolemus reports that there were 679,000 live policies in the UK in 2016 and over 959,000 are expected for 2017.

Cost of Vehicle Ownership in the UK

Indeed, the increasing adoption of telematics comes at a crucial time for motorists who have seen record increases in the costs of traditional insurance premiums, tax changes incrementing the cost of diesel vehicles and a range of fuel price increases. Moreover, in London, on top of the congestion charge, drivers with vehicles that do not meet the minimum European emission standards now also face a 10-pound T-charge. And then, of course, motorists continue to face steep maintenance and parking bills, as well as other costs associated with vehicle ownership.

Jonathan Hewett, Chief Marketing Officer, Octo Telematics pointed out how: “Driving is getting more and more expensive, particularly with large increases in car insurance, which is set to keep increasing in the New Year. More and more drivers are recognising the importance of querying their bills and saving where they can. Usage-based insurance can be the first step in keeping driving costs under control. In fact, with the prevalence of smartphones and telematics apps, saving 20% and more on insurance premiums can be just a download away.”

Octo Telematics

Octo Telematics is the largest and most experienced insurance telematics company in the world, transforming auto insurance through behavioural, contextual and driving analytics for more than 100 insurance partners.

Octo has more than 5.3 million connected users and the largest global database of telematics data, with over 175 billion miles of driving data collected and 433,000 crashes and insurance events analysed (data as of Sept. 30, 2017).

Octo Telematics Recaps Momentous Year in North America; Delivers 2018 Insurtech Predictions

As December winds down, the team at Octo North America wraps up a very successful 2017! It was a busy year for the Company overall, with numerous partnerships, multiple new products delivered, the announcement of a new IoT platform, and the acquisition of Willis Towers Watson, including its market-leading DriveAbility® solution and the DriveAbility Marketplace.

Highlights of our year include:

  • February: Octo joined Guidewire PartnerConnect™ as a Solution Partner and delivered a Ready for Guidewireaccelerator for Guidewire PolicyCenter® 8.0.
  • March: EMC Insurance Companies chose Octo as a fleet telematics partner for its commercial telematics program, Peak FleetTM.
  • April: During Distracted Driving Awareness Month, Octo enabled a new Distracted Driving scoring and analysis feature across its suite of in-vehicle and mobile telematics solutions.
  • May: Five million cars were connected to Octo’s telematics platform across the globe, a 25% increase since 2016.
  • June: The Company was named the Best Insurance Telematics Product or Service of the Year at TU-Automotive Detroit 2017.
  • July: The Company delivered an IoT insurance platform, called the Next Generation Platform, which allows for complete flexibility in the selection of sensors, analysis and output of data for all insurance and automotive services.
  • August: Octo partnered with Ana Seguros, part of Grupo Valore, to deliver a new fleet telematics program, signifying strong market demand and growing Octo presence in Mexico. Also, Octo announced a partnership with Agero, the largest B2B provider of roadside assistance services to automotive manufacturers and insurance providers in North America, to deliver an integrated crash management solution for carriers.
  • September: Octo released Vantage – formerly Glimpse plus – a cutting-edge, digitally enabled telematics service that provides a reliable way for insurers to gather accurate data on driving behavior, as well as more detailed crash detection and claims analysis. The smartphone plus smart tag solution also enables consumers to use their smartphone to monitor driving habits and become safer drivers.
  • October: Octo announced the acquisition of the UBI assets of Willis Towers Watson and will partner with them on insurance-related products. The acquisition closed in December.
  • November: North America operations surpassed the activation of three million usage-based insurance (UBI) users.
  • December: CAA Insurance Company launched CAA Connect for Ontario, Canada participants, a usage-based insurance program powered by Octo.

We’re excited to close out a busy year of impactful news and milestones. In North America, we’ve continued to partner with tier one insurers and helped them to extend the value of telematics beyond UBI. Crash and claims is one example – there is growing demand for the use of telematics to reduce the cost of claims by identifying and eliminating fraud, decreasing bodily injury claims, and cutting legal costs associated with contested claims.

2018 Predictions and Insurtech Expectations

As we look to 2018, we also analyze the direction of insurtech and telematics. A few of our predictions:

  • The addition of more sensors and smartphone capabilities that, like Vantage, deliver a superior ability to collect quality data – making the telematics offering more accurate than those based on a smartphone alone. Tag sensors are easily installed in a vehicle, pair with a user’s smartphone, and make the detection of trip events and data incredibly reliable – even if the smartphone is not in the car, improving data use and providing a better user experience.
  • The continued evolution of telematics services to improve crash data capabilities and optimize claims processing – showing a significant financial impact for forward-thinking insurers.
  • The use of telematics expanding beyond auto and transforming customer experience and insurer-to-insured relationships in other insurance verticals such as home, pet, health and on-demand insurance.

Happy Holidays and Happy New Year! We hope to see you again in 2018 for another exciting year in telematics and insurtech!

The Transformation of Insurance in The Digital Age (video)

Octo Telematics CMO Jonathan Hewett interviewed by the WSJ about the Future of Insurance.

Watch the video here.

Technology is becoming pervasive and connectivity is consuming our daily lives. Whilst the latest gadgets from Apple and Amazon excite our interest and are hugely desirable, even “must haves” such as car insurance are changing forever.

Since the dawn of the insurance industry in London, insurance has been based on educated guesswork, or perhaps more accurately, insurers have attempted to price risk based on the likelihood of accidents and what we as consumers decide to tell them! This inevitably leads to approximations and consumers being grouped into mega segments such as young or high mileage drivers. The result of this is that the many pay for the accidents of the few!

When we visit a restaurant, or use a mobile phone, we expect to pay our bill not for the table next door or the City guy glued to his phone. Now, Telematics based motor insurance makes this possible for car insurance. Using a sensor which can range from a smartphone app, to a black box, or data coming directly from a connected car, consumers can choose to qualify themselves as a good driver, benefit from lower premiums, and receive help when they may need it most.

Lower premiums result from good driving behaviour. There is no dark art here. If you drive smoothly in terms of braking, acceleration and cornering, and obey speed limits, taking account of prevailing road conditions, you are statistically less likely to have an accident and you will be rewarded with a lower premium.

If the worst does happen, then the technology will interpret the accident event and enable the insurer to contact the driver to offer assistance or, in more serious events, immediately send the right emergency services. In this sense, your car insurer can become your guardian angel.

This approach also changes the relationship between insurer and insured; instead of a once a year arm wrestle about price, it becomes an ongoing dialogue based on individual driving behaviour and incentives through premium reduction to maintain loyalty. This of course is all possible by decreasing accidents and improving the efficiency of the claims process. This truly is a “win, win” business model.

Octo is an IoT company and a global leader in the Insurtech space. We deliver our solutions through a platform that collects billions of miles of driving behaviour data and outputs solutions to allow insurers and car manufacturers to provide better services to their customers. We think of this platform as being both horizontal and verticle; not only does it do all the things an IoT company needs to do such as data collection, processing, and analysing, but also it provides specific services to insurers to transform their businesses for the age of the connected consumer.

In the 1600’s the insured could only hope that a fair premium was charged. In 2017 consumers and their insurance companies can base their relationship on the immutability and transparency of data.

Podcast: The Age of Usage-Based Insurance

Middle Market Executive is a podcast series about inspiring business leaders to take a leadership leap and open a new chapter of growth in for their middle-market companies. The series focuses on leadership lessons from the field through interviews with executives at fast-growing companies.

Octo North America’s CEO, Nino Tarantino, was recently interviewed for Middle Market Executive. The interview explores Octo’s beginnings, its expansion into the North American market, and Octo’s successes in working with our strategic insurance partners.

Listen to the podcast below:

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