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Overview: Automotive “telematics” such as event data recorders, global positioning systems, and other emerging innovations could save auto insurers $20 billion in annual claims payouts, or 17 percent of personal lines auto insurance losses each year. These savings will be the result of lower legal costs, more accurate insurance premiums, more efficient claims processing, fewer fraudulent claims, and new revenue from new monitoring and risk prevention services. But the road ahead presents challenges, too. Starting now, and over the next three to five years, innovative insurers will learn the new language of telematics data. They will apply their knowledge to improve customer service, reduce costs, refine their risk management capabilities, and offer popular new pricing models to the market. What can insurers do today to join the conversation? On the technology front, start investigating telematics technology to understand how (or if) new data fits into current systems and operations. On the business front, consider innovative ways of leveraging telematics data to reduce costs and create profitable new services. And in the regulatory arena, investigate the implications of using telematics data in ways that appeal to consumers and privacy advocates. Having those discussions will keep insurers in the loop as telematics technology changes the way people drive, and how those drivers are insured.
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