Telematics’ ability to improve the industry can no longer be ignored
If you were offered an opportunity to look into a crystal ball in order to see how the growing trends in the industry will affect it in the future, there is no doubt that insurers and brokers would jump at the opportunity to look into this ball.
While this is impossible, Executive Director of Discovery Insure, Themba Baloyi, feels that one does not have to do this in order to make sure that your company is a success going into the future. One just has to ask a key question.
"Is your company offering policyholders products and services which go beyond the traditional offering? This will be a key driver in the future of the industry,” says Baloyi.
The scramble for commoditisation has ended
This was a key focal point at a recent insurance conference in the UK where Baloyi was a key note speaker. "There is a significant feeling that in the past, insurance products and services were heavily commoditised. It was all about selling the product. The policyholder was never told about the relevant risks and policy exclusions that they are buying into when they took out the policy,” says Baloyi. This was traditionally dealt with a claims stage and may have been a significant contributor to the resentment that some policyholders feel towards certain insurers.
Baloyi points out that this has changed. There is a significant move by international insurers to design products and services which would add value to the life of the policyholder beyond the basic protection offered by the product.
Integrate your business model in order to achieve this
It is clear that insurers can no longer afford to see their policyholders in isolation. Creating a culture of fostering a sense of community and social responsibility is a key element of the industry and is being driven by international companies.
Another key aspect to this, is that companies do not need to wave a magic wand in order to make this happen. Embracing technology and using it as an important part of your business model is the perfect way in which to achieve this.
Discovery's use of telematics was seen as a revolutionary move in the industry at a time when the public was still a bit unsure about the technology and sceptical over the fact that the technology may be used as a way for insurers to keep an eye on their policyholders.
"We need to look beyond this. Safety is becoming a big element in the industry, particularly in South Africa which has the reputation of having some of the most dangerous roads in the world, with a high number of road fatalities. Through the use of telematics, we have been able to empower our policyholders by giving them tools to make them better drivers,” says Baloyi.
This will also resolve another significant challenge in the industry, the debate over the implementation of hard or soft rates. The industry has been going through a soft rate cycle for a number of years and a number of industry experts believe that the implementation of hard rates is inevitable. This poses a problem to policyholders who already see insurance as a grudge purchase. It will create a situation whereby clients move from company to company on a regular basis in order to get the best price for their cover.
By using telematics, companies can determine driving patterns and can price their risk appropriately per policyholder. The traditional view that all young drivers are more aggressive than older drivers is becoming outdated as it is perfectly feasible that a young driver is more cautious than an older driver.
"There is a problem with the implementation of telematics, particularly in the UK which has done away with a gender differentiation pricing model. Investing in telematics does come at a cost, but it is a cost which benefits the company over the long run provided that the company is fully committed towards its implementation. There are also concerns from bigger insurers who have an established book of business. It will be easy to drive telematics into any new business which has recently been set up, but how does the insurer incorporate this with its existing book? This is proving to be a challenge,” Baloyi points out.
You always take the weather with you
Another challenge which the insurance industry has had to deal with is changing weather patterns. South Africa has had to deal with two expensive periods for the industry where bad storms resulted in significant damages to vehicles.
"Telematics has the ability to tell you where your policyholders are driving and the routes that they usually take. We combine this with information which we collect from the South African Weather Service in order to send out sms notifications to clients to take their vehicles indoors when a hail storm is approaching. I was on my way back from a meeting when I got a notification of an oncoming storm, I was able to move my car under cover and avoided the hassle of having my car out of action for an extended period of time,” says Baloyi.
While Baloyi was cautious in giving specific details on how many claims Discovery had to deal with during the two periods which were affected by storms, he pointed out that there was a spike of over 10% in claims over periods of rainy conditions and, at certain periods a sporadic increase of about 20%. However, this could have been significantly larger if telematics were not used.
Engage with your client
Telematics is still a significantly grey area for policyholders. While they are aware of the technology, its use is still creating significant concerns with policyholders. This can be resolved with open and honest communication between product providers and policyholders. The traditional view of only engaging with clients at claims stage is an ‘old world way of thinking' and needs to be changed.
But who would bear the responsibility of this, would it be the insurer or would this responsibility be passed onto the broker? At the initial purchase stage, it would be the responsibility of the broker, but once the policy has been sold it is a grey area.
Editor's Thoughts:
There is a definite move internationally to make insurers more accountable for their actions. This is not necessarily a bad thing as it eliminates the feeling that insurers are quick to take your money but hide behind policies. With the global movement towards technology, it is only logical that this will be a perfect method to achieve this. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
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