Telematics not a ‘mere addition’ to auto insurers’ pricing and underwriting

All auto insurance carriers should have a telematics strategy, and their executives should assess the ability of their computer systems to collect, organize and store the data gleaned from telematics devices, Accenture suggested in a recent report.

In its report, Insurance telematics: A game-changing opportunity for the industry, Accenture advises all auto insurers to “have a strategy and a roadmap in place” for products supported by telematics.

The firm contends that insurers have three “strategic options” in implementing telematics. One is a “wait and see” approach. Another is to “take an interest in and experiment with telematics at the periphery.” The third option is to “gain first-move advantage.”

One important “success factor” for auto insurers is to understand the limitations of their information technology systems, according to the report.

“Much of the burden of a telematics program will fall on IT and insurers’ technology platforms,” Accenture noted. “An honest, rigorous assessment of a platform’s ability to collect, organise and store vast quantities of data is essential to any program launch. Insurers cannot afford to underestimate the difficulties of data capture and its application for the business.”

Insurers also need to have an “integrated approach” to using telematics.

“All parts of the organisation – including marketing, underwriting, claims, and IT – must be aligned with the program and be prepared for continuous adjustment and development,” Accenture stated.

“Accenture believes that the key to driving broad-based adoption is the vast potential for location-based value-added services.”

“Insurers that ignore telematics do so at their peril,” Accenture warned. “It is neither a fad nor a mere addition to insurers’ pricing and underwriting capabilities. Rather, telematics represents a disruptive, transformational technology that has the power to reshape the global motor insurance industry, dramatically altering every aspect of the insurance value chain from marketing to claims processing.”