Sensor-based hardware is providing insurers with another option to capture valuable information for processing claims following an accident. (Photo: Syda Productions/Shutterstock)

Since its introduction to the world, insurance telematics technology has been closely linked to the advancement and adoption of usage-based insurance (UBI), and with good reason. UBI simply wouldn’t exist without telematics, but the knife doesn’t cut both ways.

With the global telematics solutions market estimated at around $30 billion today with growth up to approximately $60 billion projected by 2025, even companies like Verizon and Tesla see the potential. As new UBI-independent telematics use cases continue to emerge; however, the opportunities for insurers to improve the claims process and use telematics to digitally connect to the customer stand out.

Cutting the cord

Many people enjoy watching “MythBusters” on TV, so how about a little InsurTech truth in the myth-busting spirit? Insurance telematics does not need UBI to “live” or act as a critical link in the claims administration and processing chain. In fact, insurers can deploy telematics solutions that do not involve behavior assessment and are strictly focused on claims. So, while insurers may not have considered it such, claims telematics is a completely standalone subset of insurance telematics technology, not UBI. As a claims-first solution, telematics introduces modern functionality to an insurer’s existing claims operation without the requirement for complex, costly systems integrations and with minimal disruption — and without the need of any UBI component to add value to the policyholder or insurer.

As opposed to many other modern solutions, telematics technology is sensor-based, and that often generates pushback from those disinclined to making a capital investment that would help to purchase, distribute or resell, and implement hardware. However, these days sensor hardware is inexpensive and easy enough for anyone to implement.

Would the average driver be more interested if a self-install, self-powered telematics sensor could be deployed and used to transmit data via a smartphone app for as little as $1 per policy per month? Since consumers today have an inherent comfort level with smartphones, utilizing apps to increase adoption is natural. Once past the perceived sensor challenges, the technology itself is instantly mobile and immediately available.

Faster, better, smarter

While most insurance executives recognize the need to transform the claims process digitally, the potential for operational disruption has traditionally made it a daunting project to start. This is a big part of the reason why insurers and technology vendors have concentrated on single pinch points, such as first notice of loss (FNOL), as the focus for claims transformation.

However, insurers can achieve quicker results by concentrating on liability, fraud and claims handling, which typically don’t require drastic changes in people, processes and systems, and where more immediate cost savings and benefits are possible. When used alongside existing systems and processes, telematics data facilitates more accurate liability decisions, faster detection of fraud and rapid determinations on the likelihood of bodily injury.

Telematics enhances available information quality to existing claims systems by providing reliable collision notifications and a clear picture of the circumstances of a collision for faster settlement of liability claims and reductions in claims handling times. As insurers begin to realize initial benefits from telematics implementations, additional return on investment (ROI) through faster resolution becomes even more viable as companies build out shortcuts, such as text access to adjusters.

Ultimately, when stacked up against an enterprise rip-and-replace claims modernization initiative, claims telematics is the faster, better, smarter solution for organizations at the beginning of a claims digital transformation journey. A claims-first telematics implementation creates an immediate win-win set of outcomes for insurers and policyholders and makes it an ideal entry point for launching a UBI program later.

Better together?

All that said, insurers have been moving toward more touchless claims handling for years, and the ongoing global Coronavirus pandemic has accelerated the process with a plethora of InsurTech solutions ready to deliver much-needed self-service capabilities to policyholders or claimants.

Let’s face it, touchless claims and self-service claims capabilities, such as enabling policyholders to become virtual adjusters through the collection of photos and data, are here to stay even after the pandemic subsides. And, while auto insurers, in particular, are struggling to find a better plan than rebating and discounting policyholders for coverage not used, industry attention is turning to telematics to improve touchless claims capabilities.

No doubt, implementation of a full-blown UBI proposition, such as a “pay-as-you-drive” program, amplifies the usefulness and applicability of telematics technology, improves customer experience, and enables the realization of savings before rebates and discounts are necessary. However, with telematics as a standalone technology implementation already creating an ROI in the claims process, insurers have time to build out modular, configurable UBI capabilities, including a rewards and messaging system that drives customer engagement.

The development path for any emerging technology can pivot from the original plan based on adoption trends and successful use cases, and telematics is no different. Having started life driving black box technology in airplanes, telematics moved quickly into the insurance industry, and today, insurance use cases are swinging from collision deterrence and understanding to behavior improvement/modification and crash prevention. But digital claims transformation must go beyond simply standing up a technology solution. For telematics, it’s about knowing how and where in the value chain that data can be used to unlock meaningful benefits.

In a claims-first application, telematics can deliver as much as eight points of combined operating ratio improvement. For insurers willing to think differently about telematics, faster determinations of liability and tighter control over claims can be realized. However, for this kind of immediate ROI, insurers must explore this technology outside of the traditional UBI mindset.

Nino Tarantino is the CEO, Americas for IMS. He can be reached for further information or comment via email at [email protected].

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