Driving Actuarial Innovation with Better Outcomes

Andy Goldby - May 29th, 2019

Driver and passenger in car

At The Floow, we have identified four key areas of actuarial innovation which allow us to provide a great service to our clients and give them a competitive advantage in the markets they serve. These are:

  • Better Scores
  • Better Insights
  • Better Partnerships
  • Better Outcomes

So far, we have looked at Better Scores and the core set of contextual and behavioural FloowScores which sit right at the heart of our products and have allowed us to develop a scoring platform proven to challenge the traditional proxy-based model for assessing risk in an insurance policy.

We’ve also covered Better Insights and how our highly predictive scores help our clients to truly understand the driving behaviours of their policyholders to create attractive retention pricing strategies and engaging strategies, including using rewards programmes and driver coaching, to help drivers improve their behaviour behind the wheel.

Most recently, in our last post, we looked at Better Partnerships and how the opportunity to train scores against claims data to develop unique scoring IP provides our clients with the opportunity to gain competitive market advantage by using unique insights into driver behaviour to drive pricing models and commercial decisions.

In the final part of this series, we are going to look at Better Outcomes and how telematics can create a number of positive outcomes for insurers including tackling fraudulent claims and other costs associated with insurance policies.

Better Outcomes

Telematics delivers many positive outcomes including improvements in road safety and fewer accidents, which are beneficial for everyone. But for an insurer’s business there is an additional cost associated with developing telematics programmes which has to be clearly outweighed by the benefits to create a sustainable ROI.

At The Floow, we have developed a thorough set of cost benefit analyses to demonstrate how our propositions can deliver long-term value for our clients. Our UK cost benefit analysis shows that the profit per policy of a telematics policy can be 3x more than a standard insurance book, even after taking into account the cost of building the programme and associated ongoing costs.

This is mainly driven by the selection benefit, fraud reduction and behavioural improvements (delivered through programmes such as coaching and rewards). Additional benefits can also be achieved through the introduction of accident identification and FNOL services, enabling very rapid assistance to be given to drivers who are involved in serious accidents and the subsequent direct reduction in the associated cost of the claim.

However, in addition to these benefits, telematics offers the ability to tackle fraudulent claims, which cost the industry many billions of pounds every year. The industry may never be able to completely prevent fraud but, in my opinion, telematics offers some very useful indicators to help insurers identify dishonest drivers by understanding potentially fraudulent behaviour before it impacts the bottom line.

The Floow has created indices which help to detect how honestly drivers are using our telematics apps by looking at the patterns of how drivers tag completed journeys and by measuring the continuousness of the journeys tagged as a policyholder driving. If a driver appears to have missing journeys or if they appear to only be tagging their worst journeys ‘as a passenger’ these are often indicators of potential driver dishonesty.

Additionally, we can create indices relating to the integrity of their proposal form declarations; for example the expected annual mileage, the ‘risk address’ where the vehicle is really kept and parked overnight or the class of use of the vehicle to help spot commuters, taxis, couriers etc who may have selected the wrong type of insurance in order to get a more affordable premium.

This allows us to locate any discrepancies which help identify dishonesty within the first week or two of the policy, enabling the insurer to make an informed decision as to how to treat these customers before the “cooling-off” period is over.

In Summary

Adding telematics into insurance propositions can provide insurers with the opportunity to tackle prominent issues within the industry, such as the cost of risk insured per policy, fraudulent claims and the honesty of policyholders relating to mileage driven, where they park overnight and how honestly drivers use telematics apps. All of this can create better outcomes for the insurer alongside the many benefits that this technology provides to their policyholders from a price and safety perspective.

To read more about our approach to scoring, check out our latest issue of Driven magazine which features a further article on this topic. To find out more about our scoring and the benefits you could achieve for your business and your policyholders, get in touch or request a demo at info@thefloow.com

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