Reprinted with permission from the Auto Insurance Report by Risk Information
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Lower rates are the number one reason why drivers choose auto insurance policies that use telematics, but carriers still struggle to communicate exactly how much policyholders can save by sharing their driving data and which driving behaviors have the biggest impact, according to a new report by Corporate Insight.
The report also reveals that many policyholders with traditional policies are unaware that their carrier offers a usage-based program, despite higher telematics adoption during the Covid-19 pandemic and greater efforts by carriers to promote telematics during online quotes. A September survey of 1,259 policyholders revealed that 71% had “not heard of” telematics or usage-based insurance.
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In the new analysis, Corporate Insight paired the policyholder survey with an examination of online quoting tools from 10 insurance companies. The consulting firm also documented the digital experience of a current customer of State Farm’s Drive Safe and Save program to gain an end-to-end perspective of how consumers encounter and perceive telematics programs.
The report, “Telematics Consumer Preferences,” points to a general lack of consistent messaging about telematics discounts — and how they’re calculated — from the quoting process all the way through policy administration, said Justin Suter, insurance research manager at Corporate Insight.
Companies could improve the quoting process by explaining exactly what telematics programs are, what behaviors influence rates, he said. For existing telematics customers, the insurance company app should more prominently display the exact discount and how it was calculated so policyholders “know why those core behaviors are important to be a better driver,” he said. That will help drivers “internalize how their behavior is going to contribute to the discount. That is ultimately why they are participating in the program in the first place.”
Among survey respondents who were already enrolled in telematics programs, 27% said they either did not receive a premium discount from their insurer for their participation or were “unsure” if they received one, according to the report. Those results mirror findings from [Corporate Insight’s] 2021 report, “Telematics Road Test” report, in which a “primary complaint that participants was the general lack of communication and clarity surrounding their actual savings amount.”
The potential for discounts is the top reason drivers with traditional auto policies said they would consider telematics, with about 29% selecting that answer, followed by those who think they’re good drivers, at 26%. Just 7% are interested in telematics because they want to become a better driver, 2% said a friend or colleague encouraged them, and 1% said an insurance agent encouraged them.
Privacy was the top concern among those who were not interested in telematics, with 18% naming that as the key deterrent and 5% saying they do not trust their insurer with their driving data. Nearly one in 10 cited a lack of knowledge about telematics, and an equal proportion believed they would not save money. Just 1% admitted they don’t think they are a good driver.
During the pandemic, carriers made progress drawing attention to usage-based options in the online quoting process, Suter said. But there is still room for improvement, especially among carriers that display the telematics option in a list of possible discounts, rather than on its own dedicated page during the digital quote process.
The struggle to communicate discounts to policyholders is the latest example of how insurance companies fail to score easy points with customers. Despite returning more than $18 billion in premiums to policyholders during the coronavirus pandemic, auto insurance companies failed to effectively communicate refunds to policyholders, according to J.D. Power’s 2021 auto satisfaction study. Only 52% of auto insurance customers surveyed by J.D. Power were aware of their insurer’s Covid-19 premium relief efforts.
In Corporate Insight’s new survey, younger participants were far more likely to know about telematics, with 35% of Gen Z policyholders indicating familiarity, compared to just 12% of baby boomers.
About a quarter (26%) of respondents were either currently or previously enrolled in a telematics program. Of those who have never participated in telematics, 45% were either “not at all interested” or “not very interested,” and 37% were at least “somewhat interested.” About 18% were “very” or “extremely interested” in enrolling.
Once told they’d be eligible for a discount just for signing up for telematics, more respondents indicated a willingness to enroll. “Carriers therefore need to stress the potential for premium savings to convert consumers who are on the fence,” the report says.
Suter noted that there is a relationship between how often, if at all, policyholders log into their policy online and their familiarity with telematics. In the most recent survey, about 16% never checked their policy online, and 43% were “unsure” if their carrier offers telematics or usage-based products.
In contrast, a 2021 survey of policyholders who logged into their policies at least once in the last six months found that 72% had heard of telematics, supporting the idea that a primary barrier to adoption is lack of education.
All 10 carrier quoting tools analyzed by Corporate Insight mention a discount for enrolling in telematics. Four carriers — Geico, Liberty Mutual, Progressive and State Farm — highlight telematics programs in a dedicated step that forces a shopper to click through the page to reach the next step, according to the report. Nationwide — which offers both a mileage-based program and one priced based on driving behaviors like speed and hard breaking — takes the unusual step of automatically enrolling prospects in its mileage-based product if the shopper’s estimated mileage is below a certain threshold, according to the report.
Lemonade, whose only auto insurance product is based on telematics, does not describe how its data is used to calculate rates. Several steps into the quote process, it tells shoppers that the “Lemonade app will need to run on every driver’s phone,” and shoppers who decline to give Lemonade permission to use driving data are dumped from the quoting tool and redirected to the Lemonade home page.
Policyholders with telematics programs often receive little proactive follow-up communication from carriers regarding their driving, discounts or how the two are interrelated, Suter said.
Corporate Insight examines company apps and interviews a panel of policyholders about the user experience over the course of a policy to gauge preferences.
In the 2021 Telematics Road Test report, Corporate Insight examined the experience of policyholders with Allstate Drivewise, The Hanover Safe-Teen, Liberty Mutual RightTrack, State Farm Drive Safe and Save and Travelers IntelliDrive. Allstate and Travelers panelists had positive overall reactions. Policyholders with Travelers, State Farm and The Hanover programs were frustrated by a lack of information about a final premium discount or rewards, according to the report.
Allstate and Liberty Mutual did a better job communicating discounts: Allstate’s Drivewise provided the projected discount at the top of both the mobile app and desktop site dashboard, along with tips. Liberty Mutual’s RightTrack portal shows the projected discount and gives tips on how to improve the projected discount, such as reducing driving mileage as well as avoiding speeding and hard braking.
Corporate Insight revisited the State Farm Drive Safe and Save program for the new report and found that information about the discount was still lacking: The amount displayed after clicking “Your Discount” doesn’t indicated whether this is the base enrollment discount, the discount applied after tracking, whether this discount will change, or what factors are used to calculate the amount, according to the report. Participants can review their scores for individual trips within the app, but the app does not indicate how these scores translate into pricing, or how well participants need to drive to maximize savings.
The driver gave the State Farm program high marks overall, saying she intended to continue beyond the trial period. She liked that the app provides a breakdown of her behavior for each individual trip, but that she did not believe that participating in the program affected her driving habits.
“Neither our 2021 or 2022 Drive Safe and Save participants received any communication from the insurer about their savings or when and how the discount thresholds had been established,” the report says. “Our 2021 panelist felt that this aspect rendered the experience ‘literally pointless.'”
The lack of clarity around discounts and how they are earned is a missed opportunity for insurers to receive credit from their customers for reducing their premiums, Suter said.
“With State Farm, you can zoom in and you can see exactly where you slammed on the brakes, and that’s definitely an improvement,” Suter said. “But then it’s still just this empty mystery box — how does that build towards your discount? And at the end of the day, customers are participating in this for the discount.”
Reprinted with permission from the Auto Insurance Report by Risk Information