More frequently, insurers are beginning to explore digital techniques to obtain and (more importantly) retain their customers. With so much choice and methods of how to do this available, it’s important to explore these options carefully. Telematics is an emerging technology in Europe. The market, with increasing numbers of young drivers, is also willing to explore alternatives insurers are offering to keep their premiums low.
Telematics can be used for rewarding customers for safe driving. Additionally, the insurer can take advantage of the data it surfaces. AI and machine learning can also use telematics data to recommend the most relevant products to customers. Other business models, like ‘pay as you drive’ and ‘pay how you drive’ are also among those being tested in the marketplace across the world. Understandably, consumers will have reservations regarding the pros and cons of telematics. Concerns around data privacy will take precedent; so a method needs to be adopted in order to garner trust in the tech. This is one such method.
‘Try before you buy’ business model
Another service insurers could benefit from is the ‘try before you buy’ (TBYB) business model. Like with any products, customers want to assess whether it’s right for them before they fully commit. The benefit of allowing drivers to test out a telematics model (through an app for example) for a short period of time before purchasing has several immediate benefits. These include:
- A more transparent relationship between the consumer and the insurer
- Intelligence for the insurer – it can measure how much investment is needed in regards to the app’s future development
- Acquiring new customers is made easier
- Gives the marketplace a taste of telematics, and increases trust in the system
Onboarding using telematics
Insurers have quite the fight on their hands when it comes to acquiring new customers. For car insurance in particular, price tends to be the only factor in making a purchase. The playing field could be evened further with insurers offering customer-centric products and services. Tailored services using telematics is an interesting avenue to explore; however insurers need to be aware of how to maximise this digital avenue to obtain new business. Areas to think about are;
- Making sure the app is user friendly and attractive to use
- Being transparent with the TBYB concept in the app. How long is the trial period for? When does the customer need to make a decision on fully purchasing?
- Are there referral rewards to get others to use the TBYB service?
‘Try before you buy’ is a new concept for the European market. Younger drivers are sure to adopt this technology more than older generations as they’re more app and technology focused. However, parents purchasing policies for their children will also be interested in the data telematics can provide; so it’s important not to ignore the older demographic.
In the U.K., 22% of the drivers under 39 chose TBYB as their preferred channel to buy car insurance. Throughout Europe, the share of drivers from all ages considering TBYB is accelerating. In terms of buying insurance, only the U.K. has a majority of its drivers buying online. 55% of drivers were using price comparison websites for the whole process. (CMT report, 2020)
Competition for new business is fiercer than ever, with a far more eager and savvy consumer market in the UK. It is imperative that insurers explore new ways of using this technology not only for their own gain, but to the clear benefit of the customer. Customers are naturally cynical creatures; insurers are far more likely to get them to engage with a trustworthy and technologically sound proposition.