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.