Tag: insurance

Insurers in South Africa aim to improve road safety through reward systems

Telematics provides insurance companies with a wealth of information about drivers. It can track your vehicle and pinpoint where you are. It collects information on how fast you’re driving, turning corners, braking, as well as what time of the day you drive. However, this information is never used against you, as a matter of fact it’s used to help you improve your safety and security and that of others on the road.

While it’s true that a telematics insurance company will profile clients on the basis of a driving risk index – rather than just sex, age and residence – the results may turn out to be very rewarding. Insurance companies never – or should never – use collected data to determine or influence the outcome of an insurance claim, but they can use this data to manage rewards programmes. And this alone should be enough to convince you to opt for a telematics system.

In fact, insurance companies are beginning to focus on the enormous potential of telematics to inspire safer driving and just like programmes encouraging you to eat healthily, exercise frequently and smoke less, insurance telematics can introduce a system of rewards for its clients.

Indeed, this is the strategy being adopted by a number of telematics insurers in South Africa, a country in which the fatality rate on the roads is almost twice the global average according to Towers Watson. The main factors are always the same: speeding, alcohol and distractions, with the cell phone at the top of the list.

While telematics can’t measure the alcohol level in your blood, it can determine where you stopped, at what time you left a given location and whether you were speeding or using your cell phone while driving. This data can be used to reward virtuous behaviour. In fact, this is a particularly interesting case in South Africa, where there already is a widespread use of anti-theft tracking devices and drivers are less concerned about privacy issues than in other countries.

According to a report entitled “Telematics in South Africa: driving change” (Towers Watson, July 2015), 60% of the South Africans who participated in a survey were either definitely or probably interested in insurance telematics. And this figure increased to 73%, if the insurer were to guarantee a fixed premium.

Roughly 10% to 15% of insured cars on South African roads are involved in a reportable accident each year. This compares to 8% to 12% in many European markets, such as the UK. Moreover, interest in telematics is markedly higher in South Africa than it is either in the United States or in the United Kingdom, according to the Towers Watson Report. Indeed, over two-thirds of the respondents understood the benefits of changing their driving behaviour.

The report indicated that 78% of the respondents claimed they would pay greater attention to speed limits, 68% declared they would drive more carefully, and 55% would keep a safer distance from the car ahead of them. Moreover, the report also found that South Africans are second only to Spaniards for their interest in smartphone applications that monitor driving.

The bottom line is that telematics insurance increases road safety and security. It pro-actively alerts drivers to imminent dangers or unsafe driving (speeding, hard braking, etc.). It provides anti-theft geo-localisation services, emergency alerts for breakdowns and accidents, and even preventive alerts for regular maintenance and askew engine or mechanical parameters. Now, it’s being transformed not only into an invaluable educational tool to improve driving styles and habits, but also as the basis for a system that not only provides lower premiums, but also further rewards for safe driving.

For further information:

• Octo Telematics – About
• How Telematics is Changing Driver Behaviour
• Telematics Saves the Day for UK Driver

I’m a pretty good husband (well at least that’s what my wife Emily tells me)! As a good husband, I approach any and all undertakings as a partnership. I like to share; that’s what the “good husbands” do, right? Most times, the answer to this is yes…unless it involves insurance.

Recently, our automobile insurance policy was up for renewal, and since I am the “insurance guy” in our home, it’s been my job to handle this bi-annual ritual. While opening the envelope from our provider, it occurred to me that in our nearly 15 years of marriage, Emily has never had the pleasure and joy of reviewing an insurance renewal statement and declaration page. Since I like to share, I made the offer.

I was surprised and pleased when Emily took the envelope with a smile and started flipping through the pages. After about 10 seconds, the smile disappeared, her brow furrowed and she said, “Oh my! I didn’t realize there were so many pages…where do I start?”
Harnessing my best Julie Andrews impression, I sang back to her, “Let’s start at the very beginning…” If you’ve ever wondered how to interpret an automotive insurance policy, here are four tips to get you started.

1. Start at the beginning and review your Declaration Page (aka. the “Dec page”).

The Dec page lists all of the information about your policy such as the name of your insurance company, the named insured, the policy period, the insured items (year, make, model and VIN of your car), scheduled coverages, endorsements, garaging address, rating info, and (if you are financing/leasing your car) lien holder information.

For new insurance customers and renewal customers alike, I suggest reviewing the dec page to confirm the accuracy of the information. Renewal dec pages are sent out well in advance of the policy effective date; take advantage of this and give it “the old once over” to make certain your personal, vehicle, and lien holder information is accurate. It’s quite easy to mistake the “1” in the VIN as an “I” or to simply “fat finger” details. The worst time to find out something is incorrect is AFTER an accident.

2. There are so many coverages! What are they and what should I look for?

Below lists insurance coverages and what they protect. As a general rule of thumb, I suggest having coverage greater than state minimums. In the event of an accident, you don’t want to be without enough coverage. Further, if you think you might want additional liability coverage through an Umbrella policy or if you have a lien or lease your car, higher coverages are often required.

• Bodily Injury (BI) covers you (or a designated driver) if you injure or kill someone else in a vehicle you are operating. Given the exorbitant costs associated with bodily injury claims, I suggest a minimum of $100/$300 ($100,000 per person/$300,000 per accident).
• Medical Payments (Med Pay) or Personal Injury Protection (PIP) covers your medical payments, lost wages and may also cover funeral and rehab expenses. I suggest evaluating your personal health insurance coverage limits to determine how much additional coverage you may need.
• Property Damage (PD) covers you for damages you cause to someone else’s property (car, tree, house, garage, etc.). When you consider most accidents are vehicle to vehicle and the average cost of a new car is now nearly $35,000, I suggest selecting at least $35k for PD.
• Uninsured and Underinsured Motorist Coverage pays for your damages by an uninsured driver and hit-and-runs. This kicks in when an “at-fault driver” doesn’t have enough insurance to pay for your total loss. I suggest having this coverage equal to your BI coverage.
• Comprehensive coverage (or comp) pays for vehicle theft or other “non-collisions” claims (i.e. deer, falling trees, flood, riots, cracked windshields, etc.). Collision coverage pays for damage to your car if you run into something (a car, a tree, even a pothole) or if your car rolls over.
  • Regardless of fault, comp and collision coverages are sold with a deductible that you are responsible to pay. If you are in a not at-fault accident, your insurance company may try to subrogate the cost of your deductible against the other insurance company. If successful, you should get your deductible refunded.
  • As a general rule of thumb, the lower the deductible, the higher your insurance premium. Make sure you have funds available to cover deductibles. I suggest checking with your insurance company to see if they offer a vanishing/disappearing deductible product so you can pay less in premium, and eventually see the benefit of a lower deductible.
  • If you have a lien or a lease, many banks have been known to cap the maximum comp. and collision deductibles (i.e. $500 or less).
  • If you have an older, inexpensive car (say, a vehicle worth <$5,000) it might not make sense to carry the additional comp and collision coverages. I suggest discussing this with your agent.

3. Read exclusions and conditions carefully.

Exclusions lists what are not covered by your policy. For example, if you live in an area prone to hail and don’t have comp coverage, you should not expect payment for hail damage. Other common stipulated exclusions are related to vehicle use (i.e. you won’t be covered if you’re injured recreating scenes from The Fast and The Furious), customization (i.e. custom paint/souped up cars), catastrophes (nuclear holocaust, earthquake) and livery business (i.e. Uber, Lyft, or operating a taxi service). The conditions section typically addresses the responsibilities of you and the insurance company relating to cancellation, changes, premiums, subrogation, etc. Read the list of exclusions very carefully as it might help you determine what additional coverages you may need and review the conditions to understand each party’s responsibilities.

4. Talk to your insurance advisor.

I strongly suggest consulting with your agent, broker or insurance company professional. They will know your state laws and minimum requirements and can answer questions. Don’t forget to ask about telematics or usage-based insurance (UBI) programs, such as the ones that Octo powers for customers around the world, including four of the 12 leading American insurance companies. Telematics is now an important factor in the determination of insurance premium pricing, allowing consumers to get better rates based on their own driving, rather than the driving behaviors of a group of “like” drivers (based on age, region, etc.).

Oh, and in case you’re wondering, after sharing this wealth of information with Emily, it seems I’ll be handling our insurance needs for another 15 years. Although she said it helped her better understand insurance, she felt it would be in our best interest if I kept handling our personal insurance needs, adding with a sly grin, “Well, you are the insurance guy!”

Safe Driving.

Insurance telematics programs have grown at an unprecedented pace in 2015! Through supporting 14 programs in North America, we’ve observed four key trends that have emerged in the Usage Based Insurance (UBI) market.

1) Leave-In Model

Most production UBI programs use technology for a short time (typically less than 6 months) and based on the policyholder’s driving during that period, a score is derived and a discount is earned. The customer returns their device and the earned discount is applied at renewal. Outside of a discount, this approach provides little value to the policyholder and robs the insurer of valuable data. We’re noticing a trend toward companies adopting a leave-in model whereby the device remains with the customer indefinitely. Insurers are realizing how temporary programs expose them to wide swings in data associated to seasonality. Further, temporary programs do not allow the insurer the opportunity to provide desirable services and features to their policyholders.

2) Services and Features

Services and features are in demand for consumers in other markets…why not insurance? In a 2014 UBI focused study, almost 80% of respondents expressed an interest in services and features such as “theft tracking, emergency response and vehicle wellness.” To this point, with retention rates nearing 90%, insurers are seeking out different ways to keep their customers “sticky” and with good reason—long-term customers are more profitable, are more engaged, and are less expensive than acquiring new customers.

Several of the insurance companies we support are actively working to incorporate our proprietary crash and claims services into their UBI product. Crash and claims services align with the insurance promise made at policy inception. Using connected car technology and precise crash algorithms, insurance companies are immediately notified when an accident is detected. This information can be used to quickly provide benefit to the customer in the form of roadside assistance, or to arrange for a rental car, or even to notify first responders in the event of a major accident with injury. Besides providing tangible benefit to the customer, these services also help the insurer close the claim quickly and reduce loss and expense ratios.

OBD devices used in UBI programs can provide many features to customers. The device is capable of diagnosing and demystifying the mysterious check engine light typically attributed to a Diagnostic Trouble Code (which usually results in a trip to the mechanic and a $80-100 bill). Beyond vehicle diagnostics, the device can assist in tracking business mileage, keep an eye on your teen driver, and be used to locate the vehicle if stolen. Currently, Octo supports several programs that use these types of features.

3) Supplemental Data

The genesis of UBI arose from insurers seeking data sources that could be used to accurately and fairly rate their auto insurance customers based on current driving behavior, in lieu of using historical driving, claims data and other proxies. In the first iteration of UBI, speed, mileage, location, time of day and certain events did a good job of accomplishing this; however, many companies soon realized that driving behavior alone does not provide the full story. Insurers want and need contextual data. Contextual data sources such as weather, traffic density, geocode, and speed limit provide a more accurate depiction of the risk. Many of our partners benefit from supplemental data and even display them on their customer portals.

4) App as a Device and Hybrid Solutions

Who doesn’t have a smartphone? With 2016 smartphone forecasts coming in at 209 million, the answer is virtually everyone. When considering people spend more time on apps than desktop and mobile web combined, one can see consumers love a good application. Insurance companies know this to be true and have developed applications for various services such as claims reporting, policy management, and policyholder convenience. Since smartphones have embedded capabilities suitable for collecting location and event data for UBI rating (GPS, Accelerometer, gyroscope), many solutions are available in the market today, including our own OctoU.

Unfortunately, standalone apps have their limitations; they are incapable of “connecting” vehicles and many valuable vehicle performance data elements taken from the OBD (i.e. VSS, DTC codes, RPMs) are unavailable. This said, hybrid products that utilize simple OBDII dongles coupled with Bluetooth Low Energy (BLE) technology and paired to a mobile phone provide the best of both worlds –a connected car with rich vehicle data, and all the benefits of a mobile app.

Emerging trends can only be addressed if you’re working with the right partner. Contact us to discuss how we can help you meet your business needs.

In the early 1990’s, credit-based insurance scoring caused a revolution in the insurance industry, as insurance companies used certain elements of a person’s credit history along with many other factors, to predict how likely that consumer was to have an insurance loss. Research showed that there was a high correlation. Companies that adopted this capability in their rating plans were able to gain competitive advantage, while those that did not, suffered through adverse selection and either went through consolidation or went out of business. Today, 95% of auto insurers use in it in states where it is a legally allowed underwriting or risk classification factor.¹

Telematics is similarly causing a new revolution in the industry, with actual driving data strongly influencing the predictability of whether a consumer will have an insurance loss or not, and thereby is an important factor in the determination of insurance premium pricing. If an accident occurs while telematics data is being gathered, it can be leveraged to initiate emergency response to aid the consumer and facilitate the quick and appropriate resolution of the claim. In addition, telematics connectivity allows for the engagement of insurance consumers with value propositions beyond the insurance paradigm (e.g. loyalty programs, vehicle diagnostics, location based services), strengthening customer satisfaction and retention. In the US, most of the top ten auto insurance carriers have successfully implemented telematics-driven usage-based insurance (UBI) programs, there are 45 states which have approved 10 or more such UBI programs and millions of consumers have participated in these programs. Companies that do not adopt this capability soon will be at a disadvantage and could have a hard time being competitive in the future.

However, telematics is not a simple proposition to adopt. Here are some tips for insurance companies considering the establishment of a UBI program.

1. Note that it will affect the entire organization across marketing, sales, underwriting, pricing, servicing and claims – get buy-in.
2. You will need resolute support from the top levels of the company leadership.
3. Expectations should be tempered around test and learns, with the ability to make on-the-fly adjustments, rather than trying to deploy the perfect launch program.
4. Begin with researching and learning about telematics capabilities via a pilot:
   • Who are the telematics service providers and what do they bring to the table
   • Select a service provider after undertaking quick evaluations
   • Set up the contract that will govern the telematics services
   • Identify the process for fulfilling devices and exchanging & protecting customer data, and acquiring telematics data, using minimal automation
   • Experiment with volunteer employees or customers and small support staff
   • Research the telematics data that is acquired and identify what and how it will be used in the program
   • Protect any intellectual property associated with the technological aspects of the solution
5. Set your strategy and launch a single-state program based on the pilot learnings
   • Identify the channels through which the launch will occur (e.g. Direct, Agency)
   • Get regulatory approval for the product offering – pick a state that is favorable and where customers may already understand the technology and implications
   • Engage the marketing department to test messaging campaigns for acquisition
   • Expand the automation capabilities for customer acquisition, exchange of customer data and telematics data with the telematics service provider. Allocate adequate time to design, implement and test with the provider including any device fulfillment process.
   • Build up the infrastructure where potentially huge amounts of telematics data will be stored and analyzed for future evolutions of the pricing algorithms
   • Expand training to sales and service personnel and increase the support team footprint
   • Monitor KPI metrics to measure success of the program
6. Confirm the strategy and expand the program’s availability
   • Tweak processes to be effective
   • Establish full automation across all systems
   • Raise awareness of the program across the organization, highlighting successes and learnings
   • The entire organization must be trained and ready to support UBI
   • Launch across multiple channels, in multiple states, with effective marketing messaging and sales support
   • Engage with customers to get feedback on what is working and what is not
   • Monitor KPI metrics to ensure program success
   • Enhance the program to incorporate value-add and convenience features for consumers

Keeping these tips in mind will certainly position a company to be more likely to succeed in adopting a UBI program.

Octo Telematics North America is a leading provider of telematics services to the global insurance industry, having been established in 2002 and now servicing several of the top tier insurance carriers in North America and elsewhere in the world. Octo offers a Try&Drive program which insurers can quickly and reliably evaluate and personalize for adoption, attracting better drivers, increasing revenues, reducing costs and increasing loyalty.

1. National Association of Insurance Commissioners (NAIC) – Credit-based insurance scores

The global private and commercial auto insurance market is forecast to continue growing

The global market value of auto insurance premiums has been rising steadily since 2014 and new forecasts expect this trend to continue well into 2018.

According to Finaccord, a leading market research company based in London, the global value of the auto insurance market rose to over US$669 billion last year and is expected to continue growing until 2018. In particular, personal motor insurance policies increased in 14 out of the 40 countries analysed by the Finaccord Global Motor Insurance: Size, Segmentation and Forecast for the Worldwide Market Report, while commercial motor insurance policies were on the rise in 18 countries.

The breakdown between the personal and commercial insurance market varies widely at the global level. According to David Parry, a Managing Consultant at Finaccord, for example, the rise in personal motor insurance premiums is especially marked in China. “This is a consequence of the rapid increase in car sales to individual customers there with the result that a market in which commercial motor insurance premiums were formerly dominant is now one in which personal motor insurance premiums account for the majority,” Parry reports.

The fastest growing markets are Thailand, India and China with annual growth rates of 13.9%, 12.2% and 11.0%. The largest motor insurance markets in 2014, remain the United States (US$213.9 billion), China (US$86.4 billion) and Japan (US$ 46 billion), while the fastest growers are Argentina (34%), India (19%) and Turkey (17.1%).

The Finaccord Report also posits that the average market growth from 2014 to 2018 will mirror that of the previous four years. The total market value should cap about US$819 billion by 2018.

The real issue, though, is what will happen on mature markets such as those in Italy and the United Kingdom or those affected by economic difficulties, such as the Russian market. Will telematics outgrow its niche status and step up to propel the insurance market by attracting new business?

A recent Digital Innovation Survey by Accenture entitled Seizing the Opportunities of Digital Transformation reviewed the opinions of 141 global insurance executives responsible for their company’s digital strategy and revealed not only that insurers expect to reap significant benefits from digital innovation and evolution, but also, and perhaps most significantly, that digital transformers – those companies whose digital strategies, investments and activities are truly innovative – are setting the pace for the insurance sector.

Indeed, the success of insurance providers has always depended on their ability to collect, understand and act upon the information provided by clients (age, sex, driving experience, etc.) and by authorities (demographics, age-related statistics, etc.).

Insurance telematics, thanks to its ability to collect and analyse big data and identify structural and behavioural driving patterns, allows insurers to custom-tailor insurance policies to the needs and habits of individual motorists, thereby expanding the natural market reservoir. Moreover, the advantages of telematics services (geo-location services for auto thefts, telemetry and accident dynamics monitoring, video recording devices, emergency alerts) and a whole host of evolving added value services means that insurances can attract a growing number of population segments by providing new benefits.

In fact, Gartner Researchpredicts that by 2020 there will be one quarter billion connected vehicles on the road and that during the next five years, the proportion of new vehicles equipped with telematic devices and capabilities will increase dramatically, making connected cars a major node in the Internet of Things.

Octo Telematics has been at the forefront of this technological evolution since its outset, when it offered the first telematics insurance policies in Italy at the turn of the new century.

Octo now has offices in London, Rome, Madrid, Stuttgart, Boston and San Paulo. This translates into 3.8 million active customers worldwide and 151 insurance partners around the world. Octo Telematics has recorded, processed and stored over 278,000 billion data points to produce a 96 Terabyte database.

For further information:

• Predictive Analytics in Claims
• Are Drivers Ready for Connected Cars?
• Octo Telematics: What We Do 

Having worked with insurance companies and their policyholders for over a decade, Octo has learned that many drivers don’t understand auto insurance. This often means they are missing out on opportunities to lower their insurance premiums at renewal.

Not to worry! We are here to help! Our insurance experts compiled five easy ways to help policyholders save on auto insurance.

1. Bundle Up! Insurance companies love multi-line customers and most will offer you deep discounts for bringing over other insurance policies (home, renters, etc.) with your auto policy. Bundling also makes it easier and more efficient for you since all of your insurance products are with one provider.
2. Credit is Key! In many states, credit is used in rating as a proxy for claims frequency. Paying your bills on time, not over extending yourself, and paying off debt can help you get a better insurance rate.
3. Connect that Car! Telematics is all the rage and most insurance companies provide discounts when you participate in a UBI telematics program. Typically, the safer you drive, the more you save. Being the leader in this space, Octo can make a few solid recommendations!
4. Membership has its Privileges! Do you belong to a sportsman group or are you a member of a civic association? If so, many insurance companies provide affinity discounts for members and supporters of various organizations, associations and groups.
5. Save paper to save “Paper!” Despite what a certain singing frog may say, it’s actually quite easy to be green and in the process, save some greenbacks. Many insurance companies offer discounts for paperless billing. Besides being convenient, easy, and good for the environment, it can save you some money!

One final bit of advice: since each state has it’s own laws, regulations and requirements, be sure to ask your agent, broker or insurance company representative for additional ways to save.

Here’s to your safe driving and to your future saving.