The world of auto insurance is changing fast, with customer expectations shifting rapidly toward auto policies that leverage usage-based pricing models, something traditional insurance IT systems can’t typically support.
Even before COVID-19 changed driving habits, consumers already started to demand behavior-driven pricing. In April 2020, Americans drove 64% fewer miles, and KPMG predicts as much as a permanent 10% reduction in the annual 3 trillion miles driven by Americans. Vehicle ownership may even decline to less than two cars per household.
The cost of claims across insurance sectors have been dropping over the past few years, too, with automation and technology reducing the cost of claims as much as 30%.
While self-driving cars are a few years off still, McKinsey predicts that auto insurance premiums could decline by as much as 25% by 2035 due to safety systems and smart vehicles.
How will your company compete? Connected car insurance is the future. Here’s what that means for your insurance company.
Implementing connected car insurance requires digital transformation
Auto insurance policies generally take into account four kinds of data: the driver, driving history, the type of vehicle, and location.
For many companies, that data lives in different databases than the pricing and actuarial tables that drive insurance offerings. In addition to pulling premiums down to stay competitive, auto insurers will need to think about how to measure and implement a mile-by-mile or behavior-based pricing strategy for connected car insurance to work for them.
That means you need to embark on a digital transformation journey that makes it easy to link driver behavior to pricing:
- Better tech: Connected car insurance requires leveraging devices to measure driver behavior and using those measurements to determine monthly premiums or other fees. Some insurers might require additional devices to be plugged into the vehicle or use a smartphone app.
- Better data: Insurance systems need to talk to each other. Systems must be able to store, share, and make use of the same data. And that data needs to flow from the initial collection of information, through underwriting, policy administration, billing, claims and renewals — which reduces cost, complexity, and opportunity for errors.
- Better policies: In such a competitive auto insurance market, customers have more choice than ever. That means providing a better customer experience, which includes more transparency on prices and policies, incentives for good driving behavior, and lower premiums to attract more drivers.
- Better security: With all this telematic data, consumers want to know that auto insurance companies will ensure their privacy and security. A data breach for a mileage-based insurance product, could result in loss of real-time locations of all insured drivers — that’s why it’s important for companies to invest in strong security infrastructure to make connected car insurance work.
Insurers need seamless back-end technology that brings together all of this customer data with pricing and changes it month-to-month based on performance. Insurance digitization delivers a much higher profit margin than traditional models of insurance and positions the brand as a force for societal good (better drivers overall) and a benefit for the customer (an individualized plan, based on my great record).
Here’s what it looks like in practice.
A connected car insurance case study: Progressive’s Snapshot program
Let’s take an example from Progressive’s connected car insurance program. Their Snapshot program offers customers a discount that rewards good behavior by using a plug-in device or mobile app, personalizing insurance rates based on how a customer drives.
This goes beyond account history like speeding tickets or accidents. Programs like these include mobile usage while driving, how many times they slam on the brakes in a given session or week, whether or not they’ve run red lights or stop signs, and even the distance between cars on the highway to see whether they’re following safe driving practices. Discounts for safe driving are super popular with their customers — and deliver more value to Progressive’s bottom line.
While it may be branded as a “better driving” campaign, what this really does for Progressive is give them mountains of customer data to work with so they can adjust their risk tables for every customer, giving them personalized pricing based on how they drive. Driving behavior is a major risk factor in these tables, but not the only one. With access to data like this, insurers can have a bigger picture of all of the risk factors involved for a given driver, giving them the ability to better price policies.
Salesforce helps auto insurers get connected
Salesforce centralizes all of the different data points so you can price insurance products and services more quickly and easily, giving you a 360-degree-view of your drivers. For example, IoT data can give you a sense of total daily miles driven. Salesforce Industries (formerly Vlocity) capabilities allow you to combine prior sales and policy performance to maximize renewal cadence and pricing.
If you want to use an IoT approach with additional behavioral statistics to change your risk tables (like Progressive) or just make it easier to see a 360-degree-view of your customer, bringing in Salesforce can revolutionize how you do business.
As a consulting company with real experience in the insurance industry and expertise in Salesforce, Silverline is uniquely positioned to deliver digital industry solutions. Our experts combine engagement layer capabilities like marketing automation, sales automation, and omni-channel service, with core Insurance capabilities from Salesforce Industries like Quoting/Illustrations, Policy Print, Product Management, Underwriting, Commissions, Post Issue Transactions, Claims, and Billing to achieve a complete business solution. See how Silverline can help your auto insurance company stay connected.