Telematics: A Win/Win for Companies and Consumers

I have been chosen by my company to participate in a pilot program.  No, I won’t be flying air planes, but even more exciting, we are breaking ground into the 21^st century of insurance!  We are studying the use and effectiveness of information obtained through telematics.  As a fleet driver, my company wants to install a little box in my car that will monitor my driving habits.  Now, before you go all George Orwell and Big Brother on me, let me explain why the risk manager in me is actually excited about this.

What is Telematics?

Telematics is the collection of data about personal driving habits that insurance companies can use to tailor rates and possibly discounts to individuals, rather than an entire "pool" or community.  The insured will install a small device, nicknamed a dongle, into the built-in port under the dash.  This dongle will measure many things, like hard stops, hard accelerations, speed, time of day, and miles driven.  It then reports that information back to the vendor to cleanse and analyze characteristics of the data that they share with the company and the driver.

Reality is this isn’t some distant future; this is happening now.   However, the industry has one gigantic hurdle to overcome--Fear.  Fear of being watched or followed and even more importantly, the fear of personal information falling into the wrong hands and being used for the wrong purpose.  It doesn't help that new reports of data breach of epic proportions are being discovered at an alarming rate.

Still, the real issue is ignorance.  For years we have preached that insurance is a relationship business and we have failed to forge true relationships of trust.  We have failed to educate our insureds on basic issues of liability, much less advanced technologies like telematics. 

What are the benefits of telematics?

The information gained can be a win/win.  By identifying safer drivers, the company can use the information to help with auto insurance pricing and risk segmentation.  This can be a win for the consumer who is interested in personalized pricing and possible discounts based on their driving habits, not their neighbor's.

How do we educate the consumer?

We must remind them that it's not a camera, it's not a voice recorder and it doesn't monitor the local businesses they frequent.  It measures driving habits.  That's it!  It collects speed, miles driven, hard starts and stops, and time of day.  We must explain that this information is only seen by the company and themselves, and it's nothing of an identity nature that can be stolen.  The best way to overcome fear is to explain, explain, and explain! 

Finally, they must see us use the devices ourselves.  I'm putting my money where my mouth is.  That's why I'm excited.  I can educate and gain trust by showing that I'm not afraid to use the same device in my car that I'm asking them to use in theirs.  

Give Me Value; Don't Waste My Time

The Internet has revolutionized the ability to access content through video.  Literally anyone can film themselves on a smart phone and post it to YouTube within seconds.  Every morning I watch at least three informative videos before I've even finished drinking my first cup of coffee.  Not to mention the occasional cat playing the piano clip.  It's effective, enjoyable and efficient. 

However, there's one small caveat.  I absolutely despise the 15 to 30 second advertisements that rob me of my precious time.  They hold my eyes and ears at proverbial gun point and act as gate-keepers of information.  

Before I can learn “5 Effective Ways to Creating Informative Infographics,” I involuntarily have to watch some family enjoy Nature’s Own granola bars while hiking or listen to the gruff raspy voice of Sam Elliott describe the hauling capacity of the latest Dodge Ram.  Even as appealing as you think it would be for a scantily clad Kate Upton to ride horse-back, the Game of War ads have got to stop!

Every time I'm forced to watch one I'm reminded of Gandalf (Lord of the Rings for those that aren't nerds) hammering down his wizards staff shouting "you shall not pass"--unless you watch this useless commercial.

Pre-video advertisements are an unnecessary evil.  It's become so bad I literally turn off the speaker, look away and refuse to watch them in protest.  In a sense, these advertisements are the telemarketers of the 21st century.

In sales there’s a very old adage “everyone wants to buy, but nobody wants to be sold.”  Deliver your content creatively--not crassly.  My point is don't let how you deliver your message get in the way of the message itself.

Remember the holiday classic movie “A Christmas Story?”  Young little Ralphie couldn’t wait to receive his Little Orphan Annie decoder ring.  He just knew his first coded message was going to be an enlightening, eye opening; special communication that could change the fate of man-kind forever-- only to find out it was a "crummy commercial" for Ovaltine.

If your product or idea truly has any value, give me a free sample.   At Sam’s Club, on Saturdays, you can practically eat lunch with all the free offerings.  Do you think the Walton family is losing any money?  I have a bag of bacon wrapped cocktail wieners in my freezer as proof they aren’t.

If people perceive you have value, you will be the product they go to the Internet to search for--not the crummy commercial they have to watch before they get to you.

Habit Five: Have A System For Follow Up

It never fails. You’re halfway through an endorsement for an insured and your phone rings.  It’s another client who informs you he’s just purchased a new vehicle, but he doesn’t have time to stay on the phone while you make the change.  In a rush you write down the VIN, ask the pertinent questions, and swiftly hang up.

 

So how do you make sure that task gets completed and not lost in the sea of “to do” notes on your desk?  No one can be perfect; we all need a system for following up--some checks and balances. 

I surveyed some of the best and brightest agents across my state and discovered several of their proven strategies for ensuring nothing slips through the net.

First, there’s no time like the present to take care of something.  Most said that they would put what they’re doing on hold and take care of the customer on the phone.  “Don’t put off what you can do right now,” said veteran agent Shane Overby, from Mainstreet Insurance in Huntington.  “Drop what you’re doing because at that moment the person on the phone is the most important.” 

His agency also advocates the use of technology for assistance.  They train the entire staff to use their agency management system to set up reminders that link to their Outlook email.  Taking an extra minute to make an Outlook entry could be the difference in accomplishing an important task and not drowning in a sea of post-it notes.

But what happens if you absolutely just can’t stop what you’re doing and take care of the call in?  I spoke to State Auto Insurance Pacesetter, Crystal Harman, from DLH Associated who had this to say:

“Scratch pads are my best friend.  When I’m on the phone with a customer I’m constantly taking notes while talking with them.  If I’m taking a change request, I have a specific form with all the questions I need to ask.    I come in 30 to 45 minutes before we open and sort through my things to do.  I start with the most important first and then process new business quotes that are pending.

I also have a filing system on my desk with folders marked what needs to be done.  Some examples include: 

Need Signatures, apps or endorsements that were issued for a loan closing but haven’t been signed yet.

Call Underwriter, items that the underwriter has requested or need approval.

Follow Ups, items I am researching for a client.”

Having a proven system can keep you from feeling overwhelmed and from losing sleep at night to stress.  You can use several of the ideas listed above or create your own, just don’t hesitate.  Being proactive, consistent, and creative in following up is the hallmark that will separate you from the sea of online marketers, and your competition around the corner. 

Habit Four: Proper Risk Selection; Can You Afford to Write That Account?

Price is a very important variable in the equation of sales.  It’s not the only thing, but we would be foolish to discount its significance.  Customers want the most bang for their buck.  Unfortunately there are companies capitalizing on the idea that insurance is a commodity and thus attempt to reduce it to the bottom dollar.  With large marketing budgets they flood the market with propaganda that all insurance policies are equal and as such you should just go with the lowest price.  If you don’t already know, let me assure you, not all insurance policies are equal.

The same can be said for your clients.  Not all customers are equal.  It’s your job to discern the good from the bad.  Those that will have payment issues, those that will occupy the majority of your time, and the loss ratio “time bombs,” aka claims waiting to happen.

You have a choice.  You can wallow in the quagmire of non-standard insurance churning customers across your stable of companies, nullifying any commission you earn, or you can elevate your focus and concentrate your efforts on those clients who will increase your retention, productivity and ultimately, your contingency.

Why is risk selection so important?

In your agency, ideally, you have A, B, and C companies.  Likewise, you have A, B, and C customers.  Matching the most preferred clients to the most preferred company is your goal.  The ability to do so is part art and part science.  I highly recommend you familiarize yourself with the National Alliance for Insurance Education and Research’s study on Growth and Performance Standards.  

 “The Growth & Performance Standards study provides benchmarks for comparing independent agency performance. The GPS study provides comparison benchmarks for income and expense averages, balance sheet ratios, and agency productivity measures.  Agencies can use the GPS study to set a course for improved growth, profitability, and productivity.”

Be forewarned, you will read some frightening information.  For example, according to the GPS study, a typical $1,000 premium account, with 12% commission only has a window of about two hours a year of service time built in.  Anything over that and you start to cut into your profit.  Anything over three hours completely exhausts any profit.  Imagine a client with the state minimum limits who changes automobiles weekly.  You might actually be paying to insure that person.

What kind of tools do you use to help with risk selection?

Most companies use CLUE, MVR, and credit as a rating tool, but these only give you a cursory look into the true potential of a risk.  Your agency needs to develop a checklist, tailored to your needs, and one that follows your agency’s growth and profit goals. 

Go back and read your agency’s mission statement.  Don’t have one?  Write one.  Having no mission statement is like trying to find an address with no map.  Every employee in the agency should have read and own a copy of the mission statement. 

Also, don’t discount agent intuition.  You should put your eyes on every risk you write and keep photos with your documentation.  By doing this you’re providing a service but you’re also performing loss control.  Does the home display pride in ownership characteristics?   What about automobiles?  Take a walk with your client out to the parking lot and walk around their car.  Just like going to look at the home, viewing the car should be presented as a service and a chance to instill that you go the extra mile.  But it also helps you know if there was prior damage to any claims reported.

Finally, after you have instituted risk selection guidelines, follow up is the next step.  Can an A customer become a C customer?  Most definitely, and vice versa, a C can become an A.  Most states have laws protecting consumers that prohibit insurance companies from non-renewing or canceling without material changes in risk or non-payment of premium.  Be diligent to inform underwriters as soon as you notice any issues so you can possibly get off a risk sooner rather than later.

Success requires growth.  However, growth without guidelines is a recipe for disaster.  Proper risk selection and company placement is a short cut on the map to becoming a Next Generation Agent.