Telematics tariffs and parametric insurances are still more the exception. However, from the insurance company’s point of view, a lot speaks for investing more in such tariffs.
As with all news from the electric vehicle manufacturer Tesla, the media jumped on the company’s announcement of their plans to also implement telematics tariffs in their motor vehicle insurance. What was celebrated as groundbreaking by the press is (almost) nothing new for insurance experts. Because for some time already, German motor vehicle operators have also been able to choose between telematics tariffs. The offer itself, in contrast, is still manageable and is also being discussed within the industry. HDI CEO Rogenhofer, for example, said in an interview with the German trade publication Versicherungswirtschaft: "Current telematics systems are too costly and offer hardly any utility value.[...] We have therefore discontinued our telematics tariff at the end of 2019."
„Pay per Use“ and telematics - fair or dangerous?
For offers from new mobility providers, it is almost seen as obvious that the customers should only pay for what they actually use, a thought that is reflected in the telematics tariffs in motor vehicle and other insurances. In particular, insurtechs are bustling at this point. Why should people who rent an e-bike for a certain amount of time be obligated to take out theft insurance that lasts longer? If you drive particularly carefully, you will cause fewer accidents and your insurance will cost less. Why not reward driving behavior with lower premiums?
If this approach were also followed in other divisions – such as a health insurance that rewards healthy living – consumer advisors predict a departure from a community of solidarity. Those in favor believe that precisely this could be the solution for financing problems in the health insurance industry, plus current tariff models would not sanction unhealthy lifestyles or risky driving with an extra premium. Such policyholders would not be rewarded, but also not penalized.
Nevertheless, “Pay per Use” and “telematics” are not undisputed at this meta level, which could also be one of the reasons why the offer is altogether still rather small.
Modern technology provides for more customer satisfaction
If damage occurs, this is initially an emotionally unpleasant event for the policyholder. In addition to their worries about the event that caused the damage, they must also worry about the costs associated with it and the question of whether the insurance will also cover the damage completely. In many insurance policies, unfortunately, the opportunities resulting from claims regulation are often not recognized. After completion of a contract, there is very little communication with the policyholders. And the damage claim is definitely one of the most intense. If you can convince them here, you effectively contribute to customer retention.
Telematics and parametrics have the potential to offer a positive experience – even if there are problems with the customers.
The keys to this are speed in processing and transparent communication. Instead of informing the insurance company about the occurrence of the damage first, sensors in the vehicle and the connected app can take on this task. This means the company receives the damage claim much faster. The message is then the initial trigger for further customer communication.
If the data from the vehicle diagnostics is enough to start regulation, the case can be processed further within the insurance company. If additional information is needed, this can be requested through the company’s app, such as photos of (paint) damage. AI-driven image analyses examine the incoming photos in an automated manner and assess the damage. Human action may still be needed in cases of doubt, though this only has to take place selectively. The processing speed increases; if the customers are informed (digitally) about every step automatically, this definitely contributes to customer satisfaction.
As expected, personal damage requiring a special assessment represents an exception from the process described. However, since the company will have knowledge of the event already, the processing can start more quickly here as well.
Claims processing can only be done more quickly with parametric insurance policies. The damage occurs objectively and without dispute. There is objective data available about a flight being canceled or a late landing, just as there is about drought or the failure of a cloud structure.
The approach from the insurtech Mosaic is innovative in that they want to connect parametrics with “smart contracting”. The policyholders would receive approval of coverage directly after the occurrence of damage through a purely digital process. With the current development of digital currencies, the money would also already be in the policyholder’s account at the same moment.
Investors are certain: telematics and parametrics are the future
A look at reports from insurtechs this year shows that investors believe telematics and parametrics are technologies that will determine the future. The US insurtech Stable was able to secure 46.5 million USD in capital; the company Moonshot Insurance, financed by the Société Générale, is now active in Germany as well and the neo-insurance provider Element recently announced its partnership with Parametrix Insurance. And in their current “Insurtech Briefing”, the consulting company Willis Towers Watson sees “parametrics” as being among the technologies with the greatest potential in addition to “cyber”and “climate”.
There are persuasive arguments for insurance companies who deal more intensively with these topics. The policyholders are already familiar with the mechanisms from other areas and use the corresponding offers. Analysts have identified them as an important issue for the future and they also contribute to customer retention.
Do you want to talk more about the topic of digitalization in the composite sector? Then contact our expert Karsten Schmitt.
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