Financial institutions

Reinventing auto insurance with telematics and usage-based models

Telematics—the integration of mobile communications, vehicle monitoring systems, and location technology—has the potential to dramatically alter the auto insurance industry. We envision several telematics and usage-based insurance models with increased levels of customer interaction, from personalized premiums, to new emergency and entertainment services, to more responsive and active claims management. While the industry has remained largely unchanged for decades, telecommunications devices in cars can create whole new business models based on realtime transmitted information.

With this technology and emerging models, auto insurers will be able to:

Measure and price premiums more accurately
Provide customized services
Improve safety and reduce claim costs

Early movers will be the winners—they will capture the safest drivers, take advantage of pricing power, and strengthen customer relationships. For insurers, the change will come quickly.

A.T. Kearney research suggests that a number of key factors are starting to push telematics to the forefront, despite customers’ concerns about privacy. In addition, insurers can take five steps for success in making telematics profitable. To learn more—