Today we released the results of our annual insurance claims survey. In the survey, we found that auto insurers feel most vulnerable in the areas of premium leakage (33 percent) and new applications (38 percent). Premium leakage is when policyholders underestimate or leave out information (such as miles they drive each day for work) in order to reduce premium payments. This type of fraud is also known as soft fraud. Soft fraud is far more common than hard fraud (such as fraud rings) and contributes significantly to the $30 billion a year all fraud costs insurers in the US, according to Allstate.
This kind of soft fraud bedevils insurers because it’s in fact very hard to catch. The industry is starting to look at more use of telematics. For example, Progressive Insurance has its Snapshot device which drivers voluntarily plug into their cars to prove they are safe drivers, in order to enjoy discounts on their auto insurance.
Besides automobile insurance, telematics can be used for all sorts of automotive services.
- Changing Driver Behavior – Beyond the benefit that Snapshot provides Progressive, having an honest assessment of how well someone drives and a driving pest that provides verbal notifications of unsafe behavior (like driving without a seat belt) can be helpful to the driver and, over time, reduce bad driving habits. In fact, inthinc found that installing a telematics device in people’s cars reduced speeding by up to 88 percent and accidents by 75 percent.
- Real-time Traffic Reports – One of the most common uses of telematics today is for real-time traffic reporting. For instance, hundreds of sensors can pinpoint the location where speed has reduced to 20 mph in a 60 mph zone, and offer drivers suggestions of alternative routes.
- Service and Maintenance – Probably one of the coolest uses of telematics is to alert the dealer when a car needs maintenance, or tell the manufacturer if a part is about to fail. The hundreds of sensors already deployed in cars can provide data that can be analyzed to determine if there is a pattern and whether a recall is warranted. Dealers can notify drivers when they need an oil change, or proactively schedule maintenance depending on the wear and tear on the specific car, not on an arbitrary date or mileage timeframe.
- Fleet Optimization – For industries that have automotive fleets, telematics can be used in concert with analytics to optimize fleet operations. Fleet owners can predict how many vehicles they need, how much fuel they are using, what the best routes are to conserve fuel consumption, etc. Fleet managers can look at other variables (like traffic and weather changes) that can present logistical challenges, and make the best decisions in order to reduce costs and improve delivery services.
- Accident Prevention – With better drivers, accidents will be prevented. However, some car manufacturers are taking this a step further. This spring, Volvo demonstrated its pedestrian airbag. If the car hits someone while traveling between 12 mph and 30 mph, an air bag pops out from where the car hood meets the windshield. Sensors on the bumper determine whether the Volvo V40 is striking a pedestrian and deploys an external airbag on the hood to cushion the blow. In the future, collision warning systems will become more sophisticated, sensing when the consumer is distracted, falling asleep or about to hit another vehicle.
The future for automotive telematics is bright – not only is automotive telematics tackling problems like soft fraud in insurance, businesses are willing to spend on telematics for better efficiency, and consumers are looking to telematics for increased safety and convenience from their automotive services.