Motor telematics – Loss ratio improvement –

Telematics offers to the Insurance Sector a broad set of opportunities and each player can develop

its own approach to address specific opportunities or to fix its weakness. Telematics is an effective

value creator in the insurance business - as described in my previous article – acting on five

different areas: Risk selection, Pricing risk based, Value added services, Loss control, Loyalty and

behavior modification programs.

The underwriting side was typically the entry point for telematics programs, but the market is

currently addressing the opportunity to generate value on the claims handling: the Insurance

Companies have the opportunity both to improve substantially the customer experience and to

improve loss ratio.

Focusing on the loss control side, there are three main telematics impacts:

1. quick and controlled process

2. objective information

3. loss prevention

1 Quick and controlled process Insurance Companies can set-up proactive and speedy claims management processes through

telematics. The telematics solutions allow the insurer to move from the traditional reactive approach

towards a more proactive approach in relation to claims handling. The timely collection made by

the Insurance Company of an accurate notification, together with an early active control of the

process, are key to lowering the cost of the claim. A recent Tower Watson research shows how a

proactive claim handling process is the main driver for an effective loss containment.

2 Objective information Telematics solutions provide structured and objective information about the claim, giving the

claims handler a better description of the crash dynamic (braking, speed, cornering, etc.). With

telematics, claims handling could move to a new paradigm: the systematic use of this new kind of

information around the crash with other contextual information could improve the effectiveness of

each step of the claims management process. This approach allows also to reduce and prevent the

frauds.

3 Loss prevention Insurance Companies analyzing big data – also with machine learning approaches - and using this

new knowledge could develop a regular communication flow to the client based on predictive

approach about risk factor as bad driving habits, car maintenance issue, dangerous weather

conditions. Loss prevention could be the next innovation area to lower the loss expenses.

Within an insurance telematics program, the redesign of claims management process is one of the

key aspects to maximize the ROI of the initiative.