Based on past driving records, “safe driver” discounts offered by auto insurance companies have delivered welcome benefits for both drivers and insurers. Now insurers are taking things a step further, tapping into real-time driving data to optimize rates and discounts. Known as “telematics,” this transmission of vehicle data can give auto insurance companies a more accurate read on what kind of drivers their customers really are – and the potential costs to cover them.
While insurance companies have much to gain from leveraging real-time automotive telematics, the majority of consumers aren’t eager to cooperate. In a recent Deloitte report, 74 percent of survey respondents said they would be somewhat reluctant or outright refuse to allow their driving behavior to be monitored. 31 percent of individuals said they would be open to sharing data with the caveat that they received a discount greater than 20 percent – a tall order for insurance companies looking to use driver data.
This consumer hesitancy, along with associated regulation, is hindering insurers from taking full advantage of the data provided by telematics. Instead, insurers are developing “opt-in” programs to capitalize on willing participants and further explore how this data can influence their current business models.
Additionally, insurance isn’t the only sector of auto services that stands to benefit from telematics. Providers of service contracts and roadside assistance plans can also employ these data insights to optimize customer experiences; using GPS to target and locate a vehicles, or tracking vehicle use and driving distance to optimize protection levels, are just a few examples. These kinds of data applications aren’t commonplace yet, but with around 70 percent of auto insurers expecting to use telematics by 2020, they will be soon.
Why the optimism? Well, as we look to the future of telematics and the auto industry, Millennial drivers are projected to open up new opportunities for insurers and service providers. Over 60 percent of drivers in their 20s, according to the Deloitte report, are willing to share data with the auto insurance industry in some form – and Gen Z’s comfort with data sharing should lead to an even larger audience for real-time, data-dependent offerings in the future. “Opt-in” programs are just the start of what’s sure to be a fascinating area to watch.
Scott McLaren is the Chief Marketing Officer of Fortegra with a background in business and communications. He once flew the Saturn VUE Lightship and awarded a Saturn Sky to Travis Pastrana for the first double back flip in the history of the X Games.