Insights from Telematics Projects Across the Globe

Allied Market Research recently published data pointing at a 34% CAGR in the usage-based insurance (UBI) market between 2016 and 2020. Such a rapid expansion would be nearly impossible without some form of collaboration between automobile manufacturers, insurers, and telematics technology platforms. 

Understanding how the three have collaborated across the globe in various pilot projects and initiatives can highlight critical insights, frameworks, and guidelines for other insurers contemplating the launch of a UBI product. While there have been several prominent collaborations across the UBI value-chain in different segments, here are some of the notable collaborative projects which have yield positive results for the involved entities:

1. Using Driver Behavior as a Metric for Market Segmentation 

The Floow UK, a telematics developer, produced research showing the inherent demand among the insurers for driver behavior data. Over 32% of insurers were seeking access to such specific datasets to understand the underlying risk profiles of drivers and tailor the insurance profiles in-line with these risks. 

Driver behavior attributes like hard braking, sharp turns, relative speeding, and acceleration are considered key in gaining insights. More comprehensive platforms like Kruzr can gauge other impacting attributes like fatigue and distracted driving as well. 

Conventionally, actuarial models have been the key mechanism to gauge the risk attributes for insurance applicants. Checking whether the risk is accurately priced or not is an altogether different discussion. Still, when the risks are not accurately priced, it can drive the consumer away and result in the loss of potential revenues. 

Given the fall in profits from the non-investing side of the business and highly concentrated revenues in the market, it is apparent that most auto insurers cannot afford to let potential revenues slip away with mispriced risks. Hence, the primary level of adoption is coming to segment the market beyond the actuarial models. Instead of using just the demographic data, geographic data, car’s details, and credit scores, insurers are seeking telematics data that helps them understand the risks associated directly with the driver’s behavioral attributes. 

Companies like Root Insurance have shifted their entire insurance risk pricing model to gauging driver behavior. The company offers insurance premium estimates in under a minute and offers annual savings of up to $900. Other than that, the company has worked extensively on ensuring the claiming process is simple and paperless. 

2. Exploring New Revenue Streams with Data Marketplaces

Data Marketplaces are already existing in capital markets services that use alternative data and marketing communications services where email databases are frequently used for sending out mass emails.

McKinsey forecasted $1.5 trillion in incremental revenue pools for the entire automotive industry with the help of connected cars. Telematics and the platforms using them will be a major component in this revenue growth.

Automobile manufacturers seek additional revenues by adding data-capturing capabilities to their vehicles right from the point of manufacturing. Ford Commercial Solutions, a division of the Ford Motor Company, recently announced its data services launch. The company has started installing modems into its commercial vehicles. Data on vehicle health, driver behavior, GPS, mileage, and fuel usage is collected by the modems and uploaded directly on a cloud platform, engineered and maintained by Ford. 

The same data is then made accessible as an on-demand service to telematics companies and fleet owners who either use it for direct analytics or enrich their product offerings. 

The insurers might be on the buying side of data if they are not already running UBI programs independent of modems and black-boxes pre-installed by automobile manufacturers. Insurers, who possess the consent from consumers, might monetize that data by making it available to advertisers. 

Kruzr collects a wide range of data-points such as hard braking, acceleration, speeding, sharp turns, drowsy behavior, and fatigue. This data is then augmented with GPS, traffic, and road conditions data. The insurers and automobile manufacturers who want to use this data can serve as an additional line of revenue, with advertisers and other industry incumbents acting as the key buyers. 

3. Telematics for Product Development and Features Outside Insurance 

As per a Frost & Sullivan report, the number of connected cars with embedded telematics has been projected to grow by nearly 3x between 2018 and 2025. While the apparent application of this data would be in the form of usage-based insurance products, the same data is being leveraged for other use cases. 

The telematics data available with Hyundai Ioniq and Kia Niro provides drivers with real-time information on charging information, nearby stations, and chargers’ availability. Honda has taken this a step ahead with its SmartCharge Beta Program. The program uses telematics data, and the data pulled from the city’s grid to direct the drivers for charging their cars when the power demand is low in the city. This helps the city’s power grid maintain a consistent power supply instead of working with sub-optimal calibrations made for fluctuating demand. It helps the drivers get quick access to already available power, which other consumers cannot use.

Kruzr SDK has been optimized to provide white-label solutions that let the automobile brand take the center-stage. The data availability, navigation, weather data, and traffic congestion insights are already aggregated to calculate real-time risk. Adding more geospatial data for expanding the use-cases is an easy integration possible with the platform.

4. Creating a Trust-Based System and Accelerated Claims Processing 

Ping An, one of the largest automobile insurance companies globally, has an internal team focusing on the applications of AI and how it can be used in conjunction with telematics data to provide better auto insurance products. 

The company has recently deployed two key offerings. The first one focuses entirely on gauging the driver’s behavioral attributes. The driver is given an individual scoring in terms of trust quota, using big data and AI. This trust quota is used in streamlining self-help insurance claims. 

The second offering focuses on expediting the self-help process. Right after an accident, the customer is asked to click photos of the car, enter the amount of the repairs and the damage incurred. Then, using the trust-quota to weigh the sincerity of the claim along with deep learning and visual computing, the Ping An app determines the extent of covered damages. The system closes the process in 3 minutes between clicking photos and deciding on the claim application.

In Conclusion

Telematics should be looked at as a strategic initiative that can expand into new markets, provide better services, and create more optimized insurance products. You can virtually use the telematics data for delivering value in any direction of the value-chain, with a comprehensive platform like Kruzr

Consumer Perception and the Increasingly Growing Demand for Telematics and UBI

E&Y data shows that over 88% of all new cars produced in 2025 will carry a pre-installed telematics system. The automobile manufacturers, insurers, and telematics technology leaders stand to benefit from that development. That trend towards 2025 shows a more important undercurrent – robust and growing consumer demand for more accurately-priced and affordable insurance products.

As per data published by the Associated Press, 75% of consumers in the U.S. want an insurance product that migrates from the legacy risk calculation metrics, which use demographic data, vehicle information, and credit score to determine the risk premiums an insured customer pays. Instead, they wanted a more accurately-priced insurance product that pays attention to their driving patterns and uses that as the benchmark to determine their risk profile.

The other side of the equation shows how the consumers have been reacting to being offered a UBI product. The same AP dataset showed that over 50% of customers accepted the offer when their insurer wanted them to shift to a UBI platform. Since it is already a known fact that UBI can help in mitigating payout risks for the insurer, the insurers have to nudge the consumers to shift to a new product, and over half of them would be happy to do so. 

While it may seem that the cost of adopting telematics technology can be too high, given the prices of IoT devices, sensors, and accompanying software, such overheads can be easily avoided using mobile apps. 64% of the consumers included in the earlier-mentioned dataset were eager to try mobile apps that contributed analyzed their driving and helped them get a preliminary understanding of their risk profile, as far as it came with a free trial. 

What is Driving the Demand for UBI Products?

Both the industry and the consumers are seeking usage-based insurance products that can help their particular interests. But, drilling a bit more into this inherent need can unravel themes that can optimize insurance products precisely as per consumer needs. As the UBI market grows at a CAGR of 29% over the next six years, as forecasted by Acumen Research, these themes will start emerging as the inherent drivers of consumer demand for UBI:

1. 83% of Consumers Prefer an Insurance Product That Protects Their Family on the Road. 

The AP-data highlighted a critical insight – insurance products have a direct impact on the family of the insured, as well as the insured person. While that insight barely affects the pricing of risks in insurance products, it is an essential factor for consumers. Earlier, there was not much that insurers could have done to satiate this need. Some insurers provided on-demand vehicle repair in case the insured customer faced a problem. But, that was the limit of leveraging this insight. 

With telematics and UBI products that use Kruzr, the scope of building on that insight has evolved. Kruzr collects more data than most of the other telematics platforms. This is critical because a driver is not a standalone entity existing on the road. Several other conditions contribute to the risk associated with the driver and the car. Some of these factors include weather data that can have a direct impact on the car’s performance or on-road visibility, traffic & congestion, which can lead to nudging riskier driving behavior as individuals try to recoup the time lost in the traffic, and navigation data that suggests risk-prone driving zones based on historical data.

Most of these data-points are publically available from reliable sources. Kruzr aggregates all this data and integrates into providing the driver with real-time advisory on what forms of risks are deterministically forecasted if she/he takes a particular route at a specific time. This seemingly little add-on can help drivers make more informed decisions about their real-time risk profile, especially when they have family members accompanying them. 

2. 53% of Consumers Have No Problem in Sharing Driving Data with Telematics Platforms.

Privacy has emerged as a significant concern for many consumers, even outside the insurance industry. Common wisdom suggests that people want increased privacy or control over who gets access to their data. 

The AP report states that more than half of the consumers in their dataset had no issues sharing their driving data with the telematics platforms. This makes intuitive sense as drivers who can see their insurance premiums drop with safer driving practices nudged by tips & real-time suggestions given by platforms like Kruzr would establish the causality between sharing the data and getting more affordable insurance. 

The role of privacy comes into highlight when compliance becomes a key consideration for the insurers. GDPR is probably one of the most remarkable sets of regulations that emphasized the consumers’ right to data protection. Interestingly, even if an insurance provider is not in the European Union but is serving the EU citizens in any form, the insurer would be subject to GDPR policies. As far as the insurer uses products like Kruzr, which are compliant with these guidelines for collecting, processing, and storing the data, the insurer’s cost of compliance gets notably reduced. 

3. According to a Published Study, 25% of Millennials Use Telematics Data to Improve Their Driving Style.

The AP-report also substantiated a use-case for UBI and telematics data – improving driver performance. While precise data show safer driving can reduce claims by up to 20% for the insurer, from the driver’s standpoint, this is becoming one of the critical themes why millennial consumers would be more accommodative to UBI. 

For the insurers, focusing on pricing the risk might be the primary objective. But for the drivers, avoiding a crash and improving the driving style is more imperative. That is the crucial reason why one-fourth of millennials are open to using UBI for improving their driving skills. 

The infrastructure, data, and technology are already in place to achieve this. Kruzr collects several data-points in a drive and aggregates to assess the risk-score pertinent to the driver. Along with this, as soon as the driver is moving into riskier territories, the Kruzr mobile app can give audio-based nudges that alert the driver to shift to a safer driving style or route. This real-time feedback mechanism is non-intrusive as it does not make the driver move her/his focus away from the road and on to the screen while still providing feedback just when it is essential. 

The non-intrusive nature of driving nudges is a crucial feature. Many consumers are under the false perception that focusing on the screen to see real-time tips on safer driving can distract the road and defeat the purpose. 

4. 57% of Respondents to a Willis Towers Watson Survey Witnessed a Drop in Their Insurance Premiums, After Shifting to UBI.

The study highlights a key benefit that many consumers are looking for – lower insurance premiums. From the insurer’s perspective, the focus is on providing more accurate risk-pricing. And that is where the data from the Willis Towers Watson study stands out. 

Suppose 57% of consumers have witnessed a drop in their payable insurance premiums. In that case, it means that the same amount of consumers were being charged higher premiums before the UBI program was offered to them. While many consumers might have stayed with higher premiums, there must have been some consumers who chose a competing insurance product with lower premiums. Mispricing risk can lead to a loss of potential revenue opportunities for the insurers.

Kruzr solves this problem by using the Kruzr Safety Index. The platform has been engineered to pull data from several resources to get a more comprehensive and timely understanding of driver-risk. It can make insurance pricing more accurate and provide fairer premiums to consumers. 49% of consumers from the same survey stated that they sought greater control over their premiums. This shows that a large proportion of consumers would be happily responsive if the insurance premium calculations are shifted to a more accurate telematics platform, like Kruzr.

In Conclusion

While telematics and UBI have a significant value proposition for consumers and insurers, the market is yet to adopt them as the key categories in auto insurance fully. Several reasons like the complex relationships between automobile manufacturers, insurers, and consumers, the concerns on privacy issues, and the lack of accuracy in the underlying technology have contributed to this sub-optimal adoption. 

Kruzr can serve as the platform that unlocks value in this ecosystem. Aggregating data from multiple sources, applying the right perspective to calculate the risk scores, and providing real-time feedback for proactive measures are just some of the features that can help the insurers and the consumers overcome the barriers to increased adoption. To know more about how Kruzr can help you offer more accurate UBI products that capitalize on the growing demand by satisfying consumer expectations, click here.

Think Beyond Selling: How to Optimize Customer Experience in Insurance?

The Value of Good Customer Experience

Profits in the core insurance business have been drying up lately. As competition in the category grows, more insurance companies will start focusing on cutting prices, which is not a sustainable strategy. The customer experience (CX) can go beyond a marketing parameter and become a reasonable strategy. There is research showing that:

  1. Insurance companies that extensively focus on customer experience have an 80% higher chance of retaining a customer. 
  2. Leaders on the customer experience metric grow their premiums annually at a rate double that of the metric’s laggards.
  3. Customer experience leaders in auto insurance tend to be 30% more profitable than their counterparts in the same segment. 

There is tangible value in providing a superior customer experience. The question arises – how do you focus on the customer experience that delights and retains the customers? The smartphone industry has created a playbook to show how customer experience excellence can be achieved. 

While the suppliers of hardware, software, and smartphone sales often tend to be common among competitors, smartphone brands focus highly on ensuring a smooth transition through every touchpoint in the customer’s buying journey. 

  1. Product Discovery: Most smartphone brands work actively with the reviewing committee. Products are often sent for free to get public feedback. Smartphone brands understand that users will start their search online and have covered this part of the process. 
  2. Ordering: Unlike other electronics goods, smartphone sales have increasingly shifted online. Most smartphone companies are quite accommodating to easy documentation and one-click orders placed on common eCommerce websites. The process has become so easy that most customers don’t have to consciously think about putting the documents together for buying a smartphone. 
  3. Customer Education: Customers have to clearly understand what they are buying. It might not be just a smartphone; for someone, it might be a camera, a social-media using-device, and an editing tool. For someone else, it might be a portable email managing device, a digital scheduler, and a voice assistant. The same product can mean different things to different people. 

Smartphone companies understand this and focus extensively on explaining each technical feature in detail. With each smartphone, there is a technical guide available in the package, review material available on the eCommerce portal, How-To videos posted in collaboration with influencers, and each feature mentioned across branding collateral. 

  1. Post-Sales Services: Companies like Apple have paid special attention to ensuring customers have someone to help them even with the smaller issues in their device. Other companies have tied up with third-party platforms to offer after-sales services like returns, repairs, and other common issues. Even though people generally change the phone in two to three years, smartphone brands have made investments in ensuring that getting a device repaired and back to working condition is easy for customers.

The parallel between smartphone brands and insurance companies becomes more prevalent when one sees industry dynamics like increasing competition, entry of new & innovative platforms, and concentrated market-share. The insurance companies can start focusing on the entire customer journey from product discovery to after-sales services and create stronger differentiators, without having to spend heavily on cutting prices or on advertising. 

Growth Gaps: Solving Pain-Points To Help Insurers Prosper

If the insurance market had already exhausted its resources in optimizing the customer experience and had still landed in an unprofitable and shrinking market, it would have been a systemic issue and cause of great concern. However, looking at the current industry trends shows room for improvement in the customer experience spectrum. 

Companies that can focus and capitalize on this space will have greater room for growth than the ones focusing on slicing prices or on investment returns being used as a proxy for declining growth in the core insurance business. 

  1. Bridging the Communication Gap: Figures publicized by SAS show that most 90% of insurers around the globe do not contact their customers even once in an entire year. Over 40% of their customers will not hear anything from the insurance company. Most insurers connect with their customers when a premium has not been paid, a claim has to be made, or a policy has to be renewed. This also means that close to 99% of the already limited interaction is entirely focused on sales. 

This communication gap covers the entire pre-sales and policy-holding period. Ideally, over 70% of the communication between an insurer and the insured should focus on helping the customer. The rest can be leveraged for sales purposes. 

  1. Getting Control of the Customer Experience: Quite frequently, there are several layers between an insurer and an insurance customer. There are brokers, advisors, employers, and other third-party institutions who frequently interact with the customer, even when the product being sold comes with the insurer’s branding. While this facilitates the due-diligence and distribution efficiencies, it creates a gap between the insurer and the insured.

There has to be an increased focus on first standardizing the customer experience across markets. Then, the insurance company can focus on optimizing the CX.

  1. Customer Education: While some government agencies, regulators, and third-party advisors have taken customer education initiatives, insurers are often absent from this narrative. A customer might have to understand terms & conditions and product variants that can include coverage of medical payments, no-fault insurance, comprehensive insurance, collision and property damage, bodily injury liability, uninsured motorist liabilities, and gap insurance deductibles, and so on. National Association of Insurance Commissioners has published a glossary of common terms that an insurance customer might have to deal with. The list includes over 500 different terms published in alphabetical order. 

While not all terms and conditions might apply to each customer, insurance customers still have to deal with the exercise of understanding which terms do apply to them. 

Kruzr: Your CX Optimizing Partner

While it is apparent that there are gaps in the customer experience offered by auto insurers, most of these problems may seem abstract. Their impact is quite tangible, and their solution can also be equally tangible. 

Kruzr offers a range of features designed to specifically enhance the customer experience you offer to your customers. From the step of product discovery to after-sales services, here is how Kruzr optimizes your CX:

  1. Product Discovery Stage: Offering Products Sensitive to Customer Needs.

    A central insight common across companies that can offer superior CX is an empathy for the customer that helps them understand what the journey from the customer’s perspective is. Insurance has been priced on risk-models and actuarial frameworks. Both these perspectives generally don’t take into account the actual challenges faced by customers. 

Kruzr helps you offer innovative insurance products that focus on making insurance affordable for the end-users. For instance, – many consumers don’t use their vehicles regularly. Yet, the premiums are to be paid at regular intervals. While this ensures cash-flow for the insurer, it makes the product unnecessarily expensive for the customer. 

By providing an effective pay-per-use model, insurers can offer products that adapt to the customer’s driving frequency, behavior, and patterns. Customers pay for the exact risk they make the insurer bear and still get more affordable coverage. 

  1. Purchase and Decision-Making Stage: Maintaining Transparency to Help Customers Understand What Are They Buying.

Quite often, an insurer might have to go through great lengths in helping a customer understand – what is she buying when she buys an insurance product from the company?

Kruzr solves that problem. By shifting the baseline of insurance coverage from a static year to an adaptive risk-per-journey basis, Kruzr can help the customers easily understand when they are exhibiting risky behavior. Since there is a strong link between risky behavior and costly insurance, the customer understands what elements in her driving style are making her pay more for her insurance. This way, Kruzr creates a feedback loop that makes the customer understand why she is paying a certain rate for her insurance. 

  1. Creating Trust: Leveraging Data Privacy to Enhance Trust in the Brand.

While there are several telematics platforms, Kruzr does not use any additional sensors or dashboard cameras to collect customer data. An app installed on the customer’s phone helps the insurer get access to granular analytics and insights, without hampering the customer’s privacy.

Additionally, Kruzr also uses state-of-the-art measures to encrypt customer data stored on behalf of the customer. Both these points can become an integral part of your marketing collateral.

  1. Post-Sales Communication: Creating Value Without ‘Selling.’

It is easy to see the communication gap post-sales. The question is – what do you fill it with? Kruzr gives real-time feedback to customers when driving to help them control risky driving behavior and have more affordable insurance. Since Kruzr also provides a white-label solution, the app can carry the insurer’s branding. This establishes an extra communication channel between the insurer and the customer, even after buying the insurance product. 

Essentially, the communication frequency goes from nearly 0% after sales to communicating across all the journeys the customers take. 

In Conclusion

Insurance is slowly turning into an industry where profits are declining, and market share has become concentrated. Reducing prices may seem to be a short-term fix, but as most long-term risk managers endorse, it is not a sustainable strategy. Focusing on the end-to-end customer experience, optimizing it, and solving pressing issues at each stage with the help of Kruzr can produce value for the customers and increase product differentiation, loyalty & retention, profitability, and growth for the insurer. 

The Need for Insurtech-Insurance Partnerships

Insurance is a risk mitigating business. While most auto insurance companies have been good risk managers, they have also faced decreasing profitability. Intuitively, lower risk should mean safer underwriting and that, by design, is not a business with great margins. The real issue has surfaced because of the changing market dynamics. These shifts have created tremendous pressure on the insurance companies dependent on investments to generate profit that are not realized with seemingly safer underwriting:

  1. The Core Insurance Business is No Longer as Profitable as It Used to Be.

Most major insurers are making profits on their investments. However, the key underwriting business has not been producing profits for most of these insurers at a growing or consistent rate. This shows the dire need for increased efficiency or the need to re-engineer the actuarial models for getting a better grip on the underlying risk profile. 

  1. The Direct Underwriting Market Has Become Concentrated.

As per data published by the Insurance Information Institute, four insurers are responsible for directly underwriting 51% of the USA’s policies. Hence, the most profitable part of the business, which gets compensated for taking the risk, is already under the control of the major companies who usually have better economies of scale. This is pushing the conventional auto insurers to focus on offering more innovative solutions that fit into the customers’ needs. 

  1. Consumer Behavior Has Changed.

Early speculations about telematics revolved around the privacy concerns. But as per the DXC Insurance Survey 2020, over 87% of consumers were ready to share their personal data for more affordable insurance rates. While this can help consumers get more tailor-made insurance solutions, it can also promote safe driving at the individual level. This would have a major impact on claim rates, as 57% of crashes happen because of individual error.

Telematics companies can be the panacea to most of the problems the conventional insurance business is facing. To avail those benefits directly, the most proactive insurance companies have increased the strength of their partnerships within the insurtech space. 

A Brief History of Partnerships Between Insurtech and Insurance Companies

While some industry observers may term the idea of partnerships between insurtech and insurance businesses to be ‘radical’ or ‘ahead of its time,’ the partnerships have already increased for a while. Octo Telematics was one of the first telematics companies to work with insurance giants like Axa and Unipol, helping insurers understand the risk at applicant-level with telematics, as early as 2005. 

Overall, these years, the nature of partnerships between insurtech and insurance companies has evolved by a large margin. Insurance companies generally take one of these four approaches, while partnering with insurtech companies:

  1. Data Sharing, Modelling, and Analytics Agreements This is the closest substitute to the vendor-company relationship. It is different in one key aspect – it allows the companies to work like partners who have an active stake in the project’s success. The focus tends to be more on discovering what can be achieved with long-term engagement and how can the partnering companies improve existing work processes. 

While such partnerships have been common, it does not allow the insurer to get the direct benefit of the insurtech companies’ capabilities. It is assumed that when a new product offering seems plausible, a new agreement would be reached. 

  1. Policy Underwriting When insurers have a higher degree of confidence in the insurtech company’s efficacy, they tend to take direct underwriting. The underlying assumption is that the insurtech company’s efficiency and prowess to mitigate risk at the application level, when backed by a legacy insurer, will give the customers a more reliable and yet affordable product. 

While the insurance company is getting benefited by the insurtech company’s direct relationships with the customers, its own large scale of operations is not lending any benefits to the deal. There are no economies of scale, and many efficiencies are left on the table.

  1. Equity Investments When the insurers have a better grip on the business proposition of the insurtech company and want to have a strategic partnership to better use the technology, minority equity investments work very well. Such relationships help the insurer get access to better technology while still participating in the insurtech company’s growth. At the same time, new products developed at the behest of the insurtech company can be distributed in the insurer’s system, without any conflicts of interest.

  2. Acquisitions Such partnerships help the insurer apply its scale of operations to the efficiency and more prudent risk management technology of the insurtech companies. The eventual entity hence formed gets the economies of scale with a better product in the distribution system. Acquisitions are generally exercised when the benefits of strategic product development and better profits outweigh the cost of acquiring. 

Even as the pandemic sent the global capital markets into a nosedive in 2020Q1, the insurtech space saw a total of over 96 acquisitions – the highest it has ever witnessed. This shows the weight insurers are putting behind the idea of dramatically improving legacy insurance operations with the efficiencies and more accurate risk understanding of telematics and related insurtech. 

Notable Partnerships

With the advent of more innovation in the insurtech space, insurers have started inking partnerships across the globe. Understanding these partnerships and their merits can help you understand your own strategic position as an insurer, and the gaps you might be willing to fulfill:

  1. By Miles UK: Underwritten by AXA

The insurance giant AXA became the underwriter to By Miles UK’s first set of insurance products. These insurance offerings allowed the customers to pay a fixed price for insurance coverage on theft, vandalism, and other similar risks while paying the rest of the premium on a monthly basis depending on their usage of the car. Customers would install a black-box device that would allow them to get the data on driven miles and the cost per drive. 

While the partnership is great for By Miles UK, AXA is yet to fully capitalize on the technology. Using the partnership, AXA has reached the market of users who drive less than 7,000 miles in a year. However, the focus on driver training and prompts to improve driving behavior are missing in the technology.

Kruzr provides a contextual analysis of the driver’s behavior and is able to predict drowsy behavior. This helps insurers understand driver behavior on a more granular scale. Instead of looking at the number of miles as the key risk measuring parameter, insurers look at the driver’s proficiency in driving safely as the key metric; the number of miles then becomes a multiplying variable. Kruzr also gives the driver voice prompts to help her/him drive safely. This way, insurers can access the same market of customers who drive less and overlay an additional layer of risk mitigation by controlling individual driving errors.

  1. Noblr: Third Point Reinsurance Makes an Equity Investment in the Insurance App. 

Noblr has created an interesting ecosystem of collecting and processing data in real-time while helping drivers get a good understanding of how their driving behavior impacts the policy rates they get. 

While the idea seems reasonable, Third Point is missing better data processing. Noblr helps users get real-time data on their driving performance. This data is then shared with other insurers who can use it to postulate the risk profile of the driver and give an attractive policy rate. Third-party algorithms conduct the actual data analytics. Thus, while insurers are able to get the processed data for understanding the risk, they are not working with any proprietary metrics other than the normal five -smoothness, focus, route, time of the day, and miles driven.

Kruzr runs its own data analytics systems using the data collected by the smartphone’s sensors. This allows the insurer working with the Kruzr platform to get predictive analytics of risky behavior, as well as drowsy behavior and the possible causes of driver’s distraction. The predictive capabilities can enrich the risk assessment and help the insurers get a more comprehensive understanding of the behavioral risks showing up in the driving styles. Besides, the Kruzr Safety Index tracks more variables to give a more detailed view of the risk-profile. 

  1. Naked: Underwritten by Hollard Insurance.

Naked has created an innovative insurance offering for the South African market. The company is expediting the insurance application process and allowing insurers to pause their premiums when they are not driving and pay only for the risk against theft and similar claims.

Hollard can tap into the market of customers who are looking to get innovative policies that can be paused when they are not driving at a stretch. The coverage provided is comprehensive, and even the claiming process has been simplified. While this works very well for the customers, it is not helping Hollard get a better understanding of the risk profile based on per mile driving or AI-driven predictive analytics, which alert the insurer right when a driver is showcasing symptoms of high-risk behavior. 

Kruzr eliminates the need for the customer to pause the premiums. With pay per mile coverage, customers pay by the number of miles they drive and the risk profile associated with their driving style. 

  1. Samsara: Nationwide Enters into a Strategic Partnership with the Platform.

Samsara has taken its capabilities as an IoT innovator and added them to the fleet management & insurance space. Under this new strategic partnership between the insurer and the IoT company, the trucking companies that are covered by Nationwide will get insurance priced based on the video telematics offered by the Samsara platform. 

While the platform provides predictive capabilities, real-time behavioral adjustment prompts, and comprehensive risk assessment that is on par with Kruzr, it does so using a dashboard camera. While this may work in a trucking setup where people inside the cabin are at work, it is not suitable for drivers who are using a personal vehicle and may want some form of privacy.

Kruzr uses its proprietary metrics and analytics to understand risky driver behavior, issuing prompts in real-time and giving comprehensive data to the insurer – without breaching the driver’s privacy. For personal car owners, this would be a major metric of choosing the right telematics-enabled insurance product. 

  1. Cambridge Telematics: State Farm Enters into Partnership to Transit into Real-Time Telematics. 

Before starting this partnership, State Farm provided a performance-based insurance policy where customers got a semi-annual grade based on their driving patterns. While the program was effective, it was elongated as the drivers got updated on their performance months after they had driven in a particular manner. 

With real-time data, State Farm users are now getting instantaneous updates on risky behaviors. While this is working well for State Farm, it may not work equally well for other insurers who do not have the scale and resources of State Farm. The insurance company already had a program in place. Cambridge Telematics added real-time functionality along with additional metrics for risk assessment. 

Kruzr takes a product-development approach. With a readily available Software Development Kit, white-label solutions support, and an AI-driven predictive engine for risky behavior mitigation, you can build and launch your ‘pay per mile’ insurance product in weeks.

Filling the Gaps with Kruzr

On a standalone basis, all insurers are getting some value out of these deals. However, they are unable to unlock value to the extent that Kruzr and its platform’s capabilities can. Kruzr remains to be one of the only few telematics and insurtech companies, that offer all these features on one platform:

  1. Extensive risky behavior measurement using a large cohort of variables like relative speed, acceleration, braking, fatigue, hard-turns, and distracted driving. 
  2. Kruzr takes risk mitigation a step ahead by giving non-distracting voice prompts that help drivers stay within the safety limits as per the traffic rules, relative conditions on the road, and their own historical driving patterns. 
  3. Product-oriented approach to go beyond data aggregation and analytics, and offer a solution that lets insurers launch and scale a pay-per-mile program efficiently.
  4. The driver’s privacy is maintained as no cameras are used for detecting driver behavior. The driving patterns and data supplied by the mobile app are sufficient to triangulate the risk metrics. 

Going Forward

Some industry incumbents like AXA and Nationwide are working with a large set of telematics and insurtech companies, using one company’s offerings for a specific use case. Eventually, most insurers would prefer some form of centralization and will need a telematics solution that can offer a comprehensive set of features. Some companies have also started working on internal telematics programs. However, the consistent success of such programs is yet to be seen as it would be challenging to run a major insurance conglomerate and stay ahead of the curve in developing industry-standard insurtech solutions. 

The industry is moving towards a three-way partnership model where insurers, insurtech companies, and automobile manufacturers will come together to create end-to-end solutions with the technology already integrated into the vehicle at the time of sale. Platforms like Kruzr, which take a product-development approach and still offer the same level of efficacy, would make pay-as-you-drive insurance more profitable for the insurers and more accessible for the customers.

Importance of Innovation in Insurance

The Need for Technological Innovation in Business

There are several frameworks structured by management theorists to assess whether a business will be able to survive in the long run or not. From financial heuristics like a business’ capacity to reinvest in itself to more market-oriented thumb-rules like competitive differentiation – many factors go into forecasting which businesses stay consistently profitable over the long run. Innovation or being a part of market-changing innovation is a strong predictor of how long the business will stay sustainably profitable.

  1. Nokia and the Smartphone Revolution

Nokia was established as a pulp-mill in 1871. As it kept reinventing itself over the years, it became one of the largest telecommunication device developers, manufacturers, and sellers. Nokia sold computers, phones, pagers, and several other key pieces in the telecommunication infrastructure value chain. That was the key reason why Andy Rubin, the founder of Android, wanted his new operating system to be a part of the Nokia-ecosystem.

However, Nokia had other plans. Between 2008-2012, Nokia hardly reacted to the hyper-growth attained by the Google-Android partnership. Eventually, as it saw market share slipping, it partnered with Microsoft. It took several years and failed campaigns to bring Nokia to its lowest valuations in recent history. Today, Nokia is operational but exists in a much smaller form than it once used to. 

The primary reason for Nokia’s decline was not rejecting some new-age startup called Android but rejecting the notion of third-party applications available on the company’s OS. Nokia made its own OS and then used its own apps to provide functionalities. Android tilted the model on its head by bringing the third-party app-store revolution to the masses, alongside Apple. Eventually, Nokia missed the boat and paid the due price by not getting to participate in the consistent rally of profits in the smartphone business. 

The insurance industry is going through a similar revolution with telematics, pay-per-users variants, and big-data integrations. Some insurance companies have taken matters in-house while others are partnering with comprehensive technology platforms like Kruzr. 

An insurance company that wants to be a part of the more efficient insurance industry, being for the very near future, will have a telematics program powered by competitive technology that makes insurance more affordable for the customers without compromising on the coverage. 

  1. Mission Insurance Company and the Risk Management Revolution

In the 1980s, Mission Insurance was operating one of the largest insurance platforms in the United States. The company was one of the leaders in the workers’ compensation segment, and from the looks of it, was positioned for growth. With its strong franchise and profitable core business, there was no reason for the company to work on liquidation or insolvency plans. 

However, back then, many insurance companies were not running optimally managed risk management practices. Since they had significant market intelligence and economies of scale in the core business, many companies like Mission Insurance Company were able to stay profitable for years in their core verticals. As the company started expanding into other insurance products, it faced quick and deepening financial troubles. 

Mission backed several unprofitable ventures and took reinsurance risk with third-party insurance products. Since the company did not have a robust risk management framework, it found itself in the middle of long-term liabilities that went way beyond the company’s earnings. Eventually, the company had to file for bankruptcy, and the proceedings lasted for more than 25 years. Many lenders got less than 40% of what the company owed them. 

Technology solutions like Kruzr can help modern-day insurance companies avoid a similar trajectory. Since the core insurance market is getting competitive and profits are eroding, it is natural for insurance companies to expand into new products. Kruzr can help the insurance companies add new products like pay-per-use, which essentially operate in the same market economics but cater to a new segment of consumers who seek affordable and yet comprehensive insurance. The entire platform operates on the prowess of data analytics, designed to measure risk parameters in the real world – predictive risky behavior, big-data inputs on traffic & weather conditions, as well as driver nudging to mitigate driving inaccuracies. 

  1. Transit Casualty Co. and the Need for Expansion

Transit Casualty Co. was found in 1945 and came with an innovative product line – it insured buses and public transit systems. While the product was innovative and there was a considerable market, Transit soon started expanding into verticals not naturally cohesive with its platform. 

The company insured several businesses across the globe – dumping yards, breast implant makers, haulers, and tobacco companies. The company was dependent on insurance brokers to run its insurance policies into the market. Since its model kept a layer of agents between the company and the businesses buying the insurance policy, Transit never had a deep understanding of what market it was expanding into. 

As a matter of fact, when the insolvency committee went to the Transit HQ, they couldn’t find most of the documentation for the policies that drove the company into bankruptcy. The company expanded into several product-lines and did so using entirely third party-driven solutions. 

At its core, Transit failed to keep track of data. Many other companies had a similar model of working with associates, partners, and brokers. Most of them did not go bankrupt. Transit wanted to drive its entire business on autopilot, without having the checks & balances in place. 

Kruzr ensures that your automobile insurance products are not running on proxy or third-party data. All the data aggregation happens at the customer-level, and the risk metrics hence calculated, are an accurate assessment of what you will owe if the claims are put in place. Since this happens in real-time with great sensitivity to economic, behavioral, and large-scale parameters, even when you introduce new products like pay-per-use, you have a strong grip on the risks you are undertaking. 

Telematics and Innovation in the Insurance Industry

What android did to the smartphone business, telematics, and data analytics are doing to the insurance business. The market data speaks for itself: 

  1. UBI is Already On-Track for a Major Thrust in Global Adoption.

Usage-based insurance has started accumulating global traction. Since more companies are operating with relatively more data, they have a clear understanding of the headwinds in the market. That is the reason why a globally unified trend of adoption in the UBI market is proof of concept. UBI-driven policies will touch the $115 billion mark in 2026, having grown at a CAGR of 21%. If you believe that UBI is still a concept for the future, the recent numbers will give you a more informed perspective – in 2018, UBI-paired policies contributed premiums worth $15 billion globally. 

  1. UBI and Telematics Can Help You Control the Risk Factors.

Market-traction might not always be the intuitive reason why companies take up new product strategies. UBI is as much a risk-management tool as it is a new product category. 

Platforms like Kruzr are able to gauge metrics that were earlier not even included in the policy documentation. Policy-holders that have Kruzr app installed on their phone are communicating data hard-braking data in real-time. Insures can now have a better understanding of such strong indicators that describe the associated risk at a greater length and also have strong predictive powers. 

Kruzr goes beyond the risk-measurement and helps the insurance companies mitigate risk. University of British Columbia researchers showed a 21% decline in hard-braking behavior after users opted for policies operating on UBI and telematics. A similar trend is visible in the enterprise space. Willis Towers Watson’s research showed an 80% drop in crashes among fleets managed using telematics solutions.

Built on this insight, Kruzr’s app nudges the driver whenever she starts exhibiting risky or drowsy behavior. Insurers who are working only with risk parameters are able to price the risk into the policy, but if too many claims start coming in, it would be a disaster as big as the ones faced by companies working with not-so-robust risk management programs. Hence, Kruzr ensures that risky behavior is mitigated right when the probability of risky behavior starts going up. 

  1. Efficient Product Engineering with Solutions that Tackle a Wide Range of Problems. 

An easy way to launch a product that can drive a company into liquidity or solvency issues is by investing significant capital into it before the product is even brought to market. Insurance companies like Mission and Transit faced a similar issue because a large portfolio of their products was run by the brokers and agents. By the time the product reached the end-user, it was already carrying the weight of overheads. 

The Kruzr team worked on the problem right at the outset. With a readily available Software Development Kit, any insurance company can develop a white-label solution on top of the Kruzr platform. This reduces the go-to-market time and shrinks the cost of development, testing, and deployment to its lowest denominator. And all of this works, even as the Kruzr technology provides a better grip on the risk parameters and a more innovative set of UBI products. 


No one would say Nokia, Mission, or Transit did not innovate or expand. However, it is not difficult to conclude that the direction of their investments in innovation was not quite right. While an insurance business should stay away from such existential risks, it cannot entirely skip cycles of innovation. Eventually, every insurance business has to stay ahead of the curve and adopt relevant technological innovations. 

Kruzr brings an all-encompassing set of solutions in the form of its AI engine, comprehensive risk assessment platform, predictive analytics, and driver-behavior nudges. When integrated with the right insurance product portfolio, Kruzr can make the missing piece of your innovation puzzle. 

Integrate Kruzr to Widen Insurance Product Portfolio

The insurance industry was considered a safe-haven for investors and consumers. Lately, the industry has been facing tailwinds coming from increasingly adverse market dynamics:

  1. Marketplace Differentiation: Four companies in the U.S. directly underwrite 51% of the insurance. This large and concentrated base means that most market growth is going only to the larger players. It also leads to higher competition in the other 49% of the market, as more businesses have to compete for the same pie, where the economies of scale are titled towards the larger companies.
  2. High Switching Preference: As per a survey conducted by Bain & Company covering over 174,000 respondents across 18 countries, 80% of digitally active millennials were ready to switch their insurers. Millennials, even if not the largest insurance market segment at the moment, is the foundation for the market in the future. Insurers that can retain this segment will have virtually secured growth for the future. But the millennial demand is volatile and not loyal to the legacy brands. The same survey reported that many millennials are ready to take insurance even from unconventional or new companies in the space.
  3. High Price Sensitivity: In data published by Reuters, 79% of respondents stated that if insurance prices became ‘too high,’ they would not get insurance in the first place. Up until now, price sensitivity was a factor of competitive positioning. As far as your insurance products had a competitive value proposition, you had recurring demand. With changes in the economic strata, more customers are considering avoiding insurance in the first place. Some laws dictate mandatory insurance policies, but they can largely get skimmed off by the major companies in the market, which already have a large distribution network, strong brand equity, and existing market share.


  4. Increasing Competition: The market data clearly highlights the competition for 49% of insurance policies directly underwritten by companies other than the major four insurers. But the competition also exists in the customer journey. Qualtrics’ research shows that 95% of consumers, who are in the market to get a new insurance policy, are considering at least three different brands. This means that no matter how strong your NPS is, your target consumer is evaluating you with at least two other brands.

How Can Kruzr Help You Widen Your Product Portfolio?

Everyday business logic would suggest that companies should focus more on differentiation. While increased spending on brand awareness campaigns may seem like a feasible solution, the results of such campaigns tend to be short-lived if not backed by equally innovative and relevant innovations on the product side. This is where Kruzr can be of great help to your insurance products portfolio.

Instead of being in the same market, populated by companies with deeper pockets and existing market share, competing for the same consumer mindshare, you can segment the market into innovative categories with more relevant and accessible products for the consumers. 

  1. Reach the Price-Sensitive Consumer by Lowering the Cost of Ownership for Your Policies.

Many price-sensitive consumers have a resonating issue with the price of owning the policy versus the benefits it offers. It is difficult to put price-tag on life and accidental risks, but consumers do seek a better value proposition from their insurance policies. 

Pay-per-mile policies can control the cost of ownership for your consumers, mitigate your risk-profiles, and help you dominate an accessible segment of the market. Any consumer who understands her driving frequency would see the value in paying insurance premiums only for the miles she is driving. 

The economic benefit of insurance products, where the low-risk drivers pay for the high-risk ones, gets expanded since you get a better understanding of the risk-profile on a per-mile basis instead of a per-insurance basis. 

  1. Provide Value-Added Services Like Driver Assistance, Which Make Insurance More Affordable for the Customers and Less Risky for You.

Bain & Company published a comprehensive study, highlighting the three key parameters that define insurers who outperform their peer-group in the insurance market – excellence in the core business, offering interconnected services, and prioritizing innovation. Kruzr’s Active Driver Guidance Interface can help you achieve all three. 

The platform takes inputs from a wide range of datasets that includes traffic areas, routes across maps, and driver performance. Based on proprietary analytics, the platform can forecast when a driver is running into riskier behaviors. It does so using voice-notifications that make sure the driver doesn’t have to shift her eyes from the road to the screen. This feature ensures that the drivers are practicing safer driving, which serves as an inherent feature for the consumers and significantly brings down your risk profile for the number of claims. 

  1. You Can Ensure Your Customers with Confidence that Their Telematics Data is Secured and Private.

There are several telematics solutions available in the market. Many of these platforms are dependent on sensors installed in the car or a dashboard camera. While the data-feed coming from such systems can help you evaluate the risk parameters in real-time, it also poses a significant threat to the consumer’s privacy.

Such solutions can work in industrial use-cases like transportation and logistics, as the driver is practically working while the dashboard camera or the sensors are recording the entire drive. However, for people who are using the vehicle for personal reasons or even for something as simple as driving to work, having a camera that records all your movements when you drive might not be very user-friendly.

Canadian Underwriter, an 86-year old publication, surveyed 1000 people and showed that 54% of respondents were not comfortable in sharing their personal information. Drawing an analogy clears the air here. Most users are comfortable in sharing their Fitbit data, which is also stored on the cloud like the data collected by telematics sensors and dashboard cams. The difference is that the users are aware of exactly how the data from their Fitbit will be used – for benchmarking their performance. For installed sensors and the dashboard camera, the feedback loop between an affordable policy that comes later and the privacy issue at hand, is long and complex. 

Kruzr gives you a more pragmatic solution by leveraging the hardware and software of the smartphone. Instead of installing cameras or sensors, users with the Kruzr app can share their driving data without concerns about a privacy breach. The platform is engineered to communicate the correlation between driving quality and insurance affordability, which establishes the value proposition to and for the user. You get the benefit of risk mitigation with more data, and the users get to keep their privacy as well as access more affordable insurance. 

In Conclusion
Most insurance businesses have focused on optimizing their risk parameters based on the same actuarial models which have been running for decades. Not only has that pushed out several customer segments on the edge of leaving the market, it has also left a lot of profit on the table for the insurance companies. With platforms like Kruzr, the insurance companies can finally shift the focus to optimizing the customer experience. And this can be done beyond the brand campaigns or an app to help with customer queries. 

Core products powered by the comprehensive capabilities of Kruzr like analytics, AI, and telematics can help insurance companies expand the width and depth of their product portfolio. The insurance products hence created, will be more affordable and customized for the end-user, and carry lower risks for the insurer. Value-adding features like predictive risky or drowsy driving with real-time nudges help the drivers stay safe and save the insurer from claims. With the customer experience at the center of the product and risks optimized across the board, Kruzr can help you get the market momentum of growth and expansion back on your side. 

Case Study: Understanding Progressive and Chubb’s Underwriting Profitability

As per Insurance Information Institute, Progressive and Chubb represent two different stories of the insurance market. Progressive remains to be one of the top three companies in the segment, while Chubb is generally counted as the one of the bottom five of the top ten auto insurers in the United States.

Both the companies have varied business lines that focus on commercial and personal insurance. While Progressive has a greater focus on auto insurance, Chubb has other insurance lines as well. Drawing a contrast between both the insurers can give a more detailed perspective on the case for underwriting losses.

Price & Profitability Vs. Market Share

Progressive has been reporting underwriting profits for a while and has enjoyed a high market share as well. However, in its 2019 statement given in the annual report, the company said the market conditions have turned a little unfavorable. The primary reason attributed to this statement of caution was the lack of increased prices and underwriting profitability coming together for the first time in years. Up until 2019, every year, most of the auto insurers were increasing the prices and yet finding it exceedingly difficult to stay above the breakeven line for underwriting. Due to its scaled efficiencies and focused offerings, Progressive was able to get more market share, while maintaining healthy margins. 

In 2019, the price increase over the years paid off a little and the auto insurance industry did not have to increase prices to remain profitable at the underwriting level and maintain a market-share. Progressive lost some market share, but its scale allowed it to maintain profits. That highlights a critical point – insurers can either choose to increase the prices to break even or maintain a market share with thin margins. 

Since Progressive is operating at a large scale and has market-leadership, it can afford keeping the prices unrevised. Most insurers that did not have a healthy margin or reserve allocation system would find it exceedingly difficult to continue in the business without having to increase the price and losing market share almost every year. 

Volatility at the Underwriting-Margin Level

Chubb, the other major auto insurer from the list, shows a different side of the picture – volatility. Since it operates several business lines, it is difficult to unravel the underwriting losses attributable specifically to the auto insurance segment. However, the North American Personal P&C Insurance can be used as a proxy since it includes automobile insurances. 

In 2016, the company made $432 million in underwriting profits which is a healthy figure when analyzed in a silo. However, in 2017, the company made an underwriting loss of $29 million, followed by a $156 million profit in 2018. This shows the high volatility that lies in the underwriting margins. 

One Solution, Two Problems- “Data”

Underwriting profitability can be improved, and the volatility of the margin can be brought down with the help of data. Companies can categorize its drivers not only based on their history, age, etc. but analyze the daily driving behavior to predict the likelihood of a claim with insurtech solutions.

Understanding this can help predict the outgoing claims better at a regular interval and adjust the incoming premiums more accurately without increasing the prices for all policyholders based on data to avoid hit on the company’s margins, losing loyal customers due to pricing and risk of high volatility.

What Does this Mean for Smaller Auto Insurers?

On an aggregate basis, the top ten companies in the auto insurance space have directly underwritten about 47.7% of premiums in 2019. And even for these top ten companies, there are visible issues with price & profit vs market share sensitivity as well as underwriting margin volatility. If a relatively smaller company with lack of sophisticated capital structures, high economies of scale, or national presence is concerned, the effect of these issues can be exponential on the forthcoming underwriting losses.

Hence the call for speeding up adoption of innovative solutions requires immediate action from insurers to help underwriters increase efficiency of their models.

The Plague of Underwriting Losses

In a logically linear world, the auto insurance industry would be inherently flourishing. But the world we inhabit has more complexities than the ones visible on the surface. Intuition would guide us to believe that since more people have been buying more cars, the auto insurers must be running in profits. 

The reality is in contrast with that assumption. While auto insurance companies are making profits, a large portion of these profits are attributable to their investment activities and not the core insurance business. The cure auto insurance business has been under siege due to a growing problem of underwriting losses. 

The State of Underwriting Losses

The auto insurer subsumes the risk on each insurance policy and is paid in the form of premiums to take that risk. When aggregated together, if the premiums do not exceed the costs that are incurred, the auto insurer is running into underwriting losses.

The last few years have been challenging, with the data clearly showing an upward trend in underwriting losses among auto insurers. Here is the data, as presented by the Insurance Information Institute:


Incurred Losses (Billions USD)

















2016 was a watershed year when the incurred underwriting losses grew by over 12%, year-on-year. Assuming that immediate corrective action was taken by auto insurers, the number got under some control in 2017. However, as the behavioral impact of the losses in 2016 started fading away, the corrective measures also lost their efficacy and the losses reverted towards the mean. Each year since 2017, the losses have been growing at an alarming pace on an annual basis. 

Triangulating with other data points resonates with the idea that underwriting losses have been increasing at a noticeable pace in the last five years. FitchRatings has published data supporting this claim. Statutory combined ratios, which take into account the aggregated loss and expenses against the premium earned, were at 77% in 2017. In 2018, this figure jumped to about 108%. 

The quantum of these losses can be understood by the fact that incurred losses shadowed nearly 67.9% of the $217 billion of net premiums earned by the Private Passenger and Auto Insurance Industry in 2017. By all metrics, such issues would have made headlines of the reports published by news dailies and analysts covering this industry. However, since the investment income has filled the space left by these growing losses, the capital markets have not shown dramatic concerns. 

How Did We Get Here?

It would be naïve to assume that the auto insurance industry did not take any measures to counterbalance the impact of underwriting losses. The real issue here is that most of these measures have not unfolded with any notable effects on the root cause here. 

Auto Insurers started tweaking the premiums to account for the underwriting risk as the first-order reaction. As of 2018, the statutory direct written premiums grew by 13% on an annual basis.  Direct Written Premiums directly go to the auto insurers’ income statement since these are not payable to the reinsurers. 

The average insurance expense incurred by auto insurance policy holders grew by about 26% between 2011 and 2017. So, there was a collective trend indicating a recurring price increase between the entire period under observation.

A comparative analysis between the growth of the direct written premiums and the growth in incurred losses for 2017-18 drills the point further. Between the same period, the losses grew by 4% which is relatively less against the 13% growth in direct written premiums. However, this increased rate of premium growth did not solve the problem, as the underwriting losses continued growing well into 2019. This indicates a critical part of the problem – the real issue lies in the way the entire process of underwriting is done, not just the way premiums are earned. 

The possible causes of the rising losses can be attributed to:

  1. Large Scale of Underwriting: Fitch reports show that there has been an aggressive growth in the written premium volume of commercial auto, compared to other categories. Commercial Auto is already a challenging vertical and this growth in the premium volume shows that auto insurers are taking a bigger portion of risk directly while underwriting large scale auto insurance contracts.

Larger scale of underwriting should count for higher growth in the core business. However, given the way underwriting activity is being executed, larger scale of underwriting would mean scaling an inefficient system that may further the losses incurred.

  1. Volatility in Claims: Volatility in claims has not been considered a major problem by most industry observers. The Insurance Information Institute’s data show that the claim frequency across the liabilities and physical damage category has not moved by a significant margin. 

However, the severity of the claims has risen in all the four categories. Bodily Injury claims grew by 13.6% between 2009 and 2018, which is not an alarming figure given the fact that medical expenses have also gone up in the same period. The real issues are highlighted by the growth in Claim Severity across the other categories. Claim Severity grew by 33%, 25%, and 32% in Property Damage, Collisions, and Comprehensive categories respectively. 

Since the severity of the claims is high, even minor volatility in claim frequencies can result in a high base impact on the auto insurer’s finances.  

There is a postulated theory that the pre-2011 era of inefficient policy designs and risk allocations has resulted in this underwriting loss problem. However, one must observe the fact that it has been close to a decade for the industry to absorb and rectify the impact of the issues from the pre-2011 times. Since the scale of underwriting losses is going up, the underlying problem remains unsolved.

Taking Systemic Steps to Attain Underwriting Profitability

The given data-points illustrate the fact that there are systemic and company-level issues. As a business, there is nothing wrong with growing at the behest of investing income. Auto insurers can focus on the part that they have under absolute control on – systematically moving towards underwriting profitability.

  1. Integrating Telematics for Assessing Profitable and Fair Premiums
    Smaller auto insurers may look at the behemoth presence of larger insurers and get overwhelmed. However, smaller auto insurers can go for quick strategic turnarounds and integrate telematics into their risk assessment models. 

To attain profitable premiums, the risk assessment at each insurance profile level has to be adjusted and made sensitive for relative speed monitoring, accelerating, braking & cornering, fatigue scores and distraction scores. By pulling the data from these sources and engineering premiums around them, the 20% of insurance customers who are responsible for 80% of the claims can be offered appropriate premium rates. 

  1. Nudging Behavioral Change for Lowering Claim Rates
    While telematics is a great start to accurately monitor the risk profile for each insurance application, it is not a standalone solution. This is because offering a premium and taking a claim are two different processes. By ensuring the premiums are accurately calculated, the probability of underwriting goes up. However, if the frequency of claims is not controlled, the probable profitability can easily erode. 

Behavioral changes can be made by integrating virtual assistance, AI, and real-time analytics. Auto insurers should offer an integrated platform that can plug voice or visual interface assistance based on these three areas and improve driver safety scores. After all, a safer drive will also be a claim-free and a profitable drive for the auto insurer. 

  1. Navigating from Small Market Share to Profitability
    Given the size of the market and the presence of major auto insurers, it would be difficult to dominate the market. However, dominating the market is not the end-goal for most auto insurers since it does not guarantee profitability. This profitability can be attained using innovative segmenting models like Pay Per Mile, which shift insurance horizons from risks associated across profiles and insurance tenures, to each mile of driving. 

Solving the underwriting losses problem will require several systemic changes from the auto insurance industry. However, taking up technological innovation is still in the hands of the auto insurance company. So, essentially, profitable underwriting is still in your control. 

Unlocking Customer-centricity with Digital Insurance

Customer-centricity means prioritizing the consumer in all business decisions. This has been the case for all consumer-facing industries for quite some time now. While every company would like to believe and say so, putting this into practice is fairly difficult and the auto insurance industry isn’t immune to this. However, in the commoditized world of insurers, customer centricity is no longer just a good to have, but is the best differentiator and the best strategy for growth. 

COVID-19 hasn’t been kind to any sector, and insurance too has had to deal with the fallouts. With job losses and the economy slowing down significantly, consumers will get conscious and more demanding. The best way for Insurers to differentiate and compete by creating customer-centric services and offerings. 

A McKinsey report suggests that there is a two-level impact of COVID-19 on the U.S auto insurance industry. From the outset, as there are lesser people on the road, the number of fatal cases and hence the claims are going down. While this shows what is happening on the cost side, it does not take into account the pressure on the revenue side. The same market-effect also shows a decline in car sales and hence in the auto insurance taken on these cars, which now stand unsold. If the auto insurance industry wants to cope with these market forces, it will have to find ground-up ways to realign its interests with that of the individual customers. 

Conventional practices and competition in the industry have made the auto insurers push out products at suboptimal rates which seem common for the market but are not equally personalized for the end-user. A comprehensive change in the industry that begins with leveraging digital platforms, can serve as the necessary solution to solve this problem.

The Era of Digital Insurance: Catering to Individual Demands

Customer-centricity is all about creating value for the customer and catering to their individual needs. The digital revolution has given birth to a new connected world where adding value to a customer’s experience is both essential and challenging at the same time. The kind of value creation done by digital giants like Amazon, Google, and Apple is really hard to match for a tightly regulated industry like insurance. Consumers now have a wider range of options with highly personalized offerings available in every industry. Their sensitivity to personalized offerings clearly shows that they expect the same out of the insurance industry as well. The trend is going narrower from formulating strategies for a target audience to distinguishing the needs of individual customers. Customers now expect friendly, personalized, relevant, and enjoyable experiences across multiple channels. They want their specific needs to be understood and catered to.

According to a report published by Accenture titled “The Digital Insurer: The Customer-centric Insurer in the Digital Era”:

“The real challenge of customer-centricity is to move away from the product-driven push and to develop the corporate ability to truly understand the customer’s stated and tacit needs, to generate new ones, and to provide highly personalized solutions and remarkable experiences that are relevant to each individual’s preferences, circumstances and point in time.”

Distinguishing the Individuality and Creating Customized Products

It is evident how digital disruption of distribution channels has forced many industries to adapt to new norms of customer-centricity. For the auto insurance industry, the disruption will begin on three fronts:

1. Having simpler products: A product that is simple to understand and connects directly to an individual customer has a better conversion rate.

2. Having seamless processes: Using Big Data Analytics and AI tools can reduce the time and efficiency of processing. With no manual intervention, the customers are assured of the quality experience which they now take for granted.

3. Transparency in Communication: This can be the most critical factor for an industry like Auto Insurance. The level of transparency that the digital revolution has brought is unforeseen and the customers are getting used to it. They want the same from other industries too.

For an industry like auto insurance which is highly affected  in the crisis caused by COVID-19, learning from the digital giants and changing their approach towards customer-centricity is the only way forward.

According to the report published by Boston Consulting Group( BCG):

“Insurers must radically improve customer service if they are to combat the reduced profitability of products, the digital disruption of distribution, the competition from new, non-traditional entrants, and the rise of savvier, more value-driven consumers. Doing so requires taking a more customer-centric view of operations in three key areas.”

The following excerpt from the Report clearly depicts how waiting time takes almost 95% of the processing time for an insurance application.

Courtesy: BCG

The Road Ahead for Auto Insurance Sector: Understanding Individual Customers

As per a  2020 DXC Insurance Survey wherein more than 2000 US consumers from the insurance community participated  was conducted to  gauge their views about insurance and their interaction with those providing coverage :

1. 66% of consumers are open to using technologies in exchange for better services or lower insurance premiums.

2. 42% of surveyed consumers believe that they are underinsured.

3. 87% of consumers stated that they were comfortable in sharing their personal information, as far as it helped them in availing more affordable insurance. 

These data-points show that the three perceived hurdles of harnessing digital practices – lack of adoption, lack of a market need, and privacy issues, are no longer systemic issues. The auto insurance industry can now begin its reconstruction to offer personalized insurance products.


Some of the ways through the auto insurance sector can transform itself in the Post-COVID world is by adapting the following strategies:

1. Assess the Current Pricing-Models: The pricing models have to be changed as per the changing time. The unemployment rates are increasing and given the economic turmoil, might be on a downward trajectory for a while. The legacy pricing models were not engineered with a sensitivity for such market conditions. At the same time, pandemic or system-induced temporary unemployment does not make an individual uninsurable. It simply calls for adjusting the legacy pricing models to be re-engineered in a way that takes into account this situation and allows even the unemployed individuals to avail insurance. 

2. Realign the Marketing Strategy: The entire marketing strategy has to be shifted from conventional ideas, tools, and channels, to a more data-driven approach. Data analytics technologies that sources deeper forms of data to unravel behavioral patterns with AI, ML, and NLP, will lend an edge to the companies that seek deeper and more actionable insights about their customers.

3. Support the Existing Customers: The pandemic has affected everyone in its own way. If the auto insurance industry can learn the grievances of the customers and help them in sustaining through tough times, this will help in creating a strong base of loyal customers.


COVID-19 has surely affected the auto insurance industry in an unforeseen manner but there is always a silver lining if one can find it. This might prove the best time for the industry to reshape its strategy towards distinguishing and catering to the individual needs of the customer instead of pushing run-of-the-mill products. The product, it’s delivery and the marketing efforts have to be redefined for the industry to regain its foothold. 



Cost of Road Accidents: Why should everyone care?

Road traffic crashes numbers are staggering and is the eighth leading cause of death globally, claiming more than 1.35 million lives each year and causing up to 50 million injuries. That’s nearly 3,700 people dying on the world’s roads every day.

Injuries in many cases cause disability with life-altering and long-lasting effects. These losses take a huge toll on families and communities. The cost of emergency response, insurance, auto repair, health care, and human grief is immense.

Deaths and injuries resulting from road traffic accidents remain a serious global problem and current trends suggest that this will continue to be the case in the foreseeable future.

But road traffic crashes are not “accidents”. Most of them are preventable

Distracted driving, fatigued driving, over-speeding, driving under influence of drugs or alcohol, rapid urbanization, poor safety standards, lack of enforcement, and a failure to wear seat-belts or helmets contribute to the trends we see in road accidents over the past decade.

The growth of the auto industry in the past decade has seen faster vehicles, it’s a generally accepted statement across the globe, “speed thrills but kills”, a lot of safety organizations use this catchy phrase to raise awareness about the problem. But the real issue is a contradiction, the vehicle manufacturers advertise about the performance of the vehicle, often about the speed of the vehicle, how fast a vehicle can travel 0-100, top speed, terms like ‘racing DNA’ referring to the performance of the vehicle.

The problem of people’s obsession with speed coupled with distraction, tendency to break rules and fatigued driving could be life-threatening.

In a popular British web series on Netflix, Black Mirror, an episode showcases the human cost of distraction while driving. A man loses his entire family because he couldn’t control the urge to check his phone while speeding on the highway in the night, plagued by the fatigue of driving.

According to marketing industry influencer Krista Neher, the human brain can process images up to 60,000 times faster than words; Visual awareness tools like Black Mirror episode helps put a face, name, and story behind the staggering number of injuries, accidents, and fatalities.

Government and Road Crashes

In addition to the above problems, the socio-economic factor plays an important role in understanding road accidents. Developing countries, moving rapidly towards urbanization, see a major chunk of global road accidents given their infrastructural limitation, inadequate road safety law practices and lack of standard safety equipment in vehicles.

With an average rate of 27.5 deaths per 100,000 population, the risk is more than 3 times higher in low-income countries than in high-income countries where the average rate is 8.3 deaths 100,000 population.

Although only 1% of the world’s motor vehicles are in low-income countries, 13% of deaths occur in these countries. There has been no reduction in the number of road traffic fatalities in any low-income country since 2013.

Even though 123 countries representing six billion people have laws that meet best practice for at least one of the five key behavioral risk factors, the enforcement of road safety laws still remains a challenge for the government bodies across the globe, given the scale of the problem and priority of under-developed and developing countries being poverty alleviation and economic growth.

Developed nations like United States of America, United Kingdom, Germany, and the Netherlands have learned from their past mistakes and fortunately grown in their understanding of road accidents at the same pace as the technology developments in the auto industry with certain loopholes yet to be covered to bring down the numbers to acceptable.

Countries in the Americas and Europe have the lowest regional road accident fatality rates of 15.6 and 9.3 deaths per 100,000 people respectively.

Regulatory, behavioral, technological factors play a role in understanding why the problem is still prevalent in developed nations across the globe. For example, the U.S. does not have generally accepted speed limit restriction of 50 km/h on urban roads, there is insufficient evidence on the effectiveness of legislation to limit or prohibit the use of mobile devices while driving to establish best practice criteria.

The joint efforts of the government, safety organizations, and private organizations have helped reduce road accident rates in 2018 by 25% in high-income groups and 23% in middle-income groups since 2013.

Auto Insurance Sector and Road Crashes

Human life and government are not alone in facing adversities from road accidents, the auto insurance sector also pays a heavy cost for the unfortunate events on road.

The auto insurance business in 2018 reported a whopping $783.10 billion in written premiums, contributing 33% to total non-life insurance premiums of $2.373 trillion. Overall profitability of global Property & Casualty remains at 6‒6.5%, which barely covers the industry cost of capital.

In the U.S. auto insurance losses and expenses have exceeded premium for every year since 2007. The auto insurance sector reported earned premiums of $110.48 billion in the year 2015 with a risk exposure of $188.51 billion. Companies countrywide incurred losses of $88.36 billion in the year with a loss ratio of 79.98.

A partial reason for the losses is high claim rates and accidents. In the year 2015 U.S. witnessed 37,757 fatalities and over 4.4 million serious injuries which required immediate medical attention.

The cost of medically consulted injuries was estimated at $440.6 billion. Costs include wage and productivity losses, medical expenses, administrative expenses, motor-vehicle property damage, and employer costs.

The United States alone reported 277 million vehicles, 227 million licensed drivers, and 3.24 billion miles driven annually. Calculating the claim frequency and claim severity for the vast number of vehicle users accurately is a difficult task.

Dan Ariely, a Duke University professor, and the Chief Behavioural Officer at Lemonade, says, “Every dollar your insurer pays you is a dollar less for their profits. So, when something bad happens to you, their interests are directly conflicted with yours. You’re fighting over the same coin.”

Insurance Companies and Road Crashes

U.S.’s largest auto insurer’s wing, State Farm Mutual Automobile Insurance Company, in the year 2019 reported premium earned of $42.14 billion compared to $43.43 billion a year ago and claims and expenses of $42.94 billion compared to $42.15 billion in the previous year. The company’s underwriting loss for 2019 stood at $763 million compared to underwriting gain of $1.28 billion in 2018.

United Kingdom’s majority market stakeholder in the auto insurance sector, Admiral Group, for the year 2019 reported a motor loss ratio of 87.6 compared to 88.1 a year ago.

In such a cost-competitive market, auto insurers are trying to utilize technology to better predict claims and premiums of customers. Driver’s habits play an important role in the occurrence of accidents hence solutions that help increase the underwriting gains and reduce the loss ratio are encouraged in the modern insurance sector.

U.S.’s third-largest auto insurer has found alternatives to better judge the claim ratio using telematics. In 2015, the company adopted a telematics solution to better analyze driver habit and adjust premiums accordingly. The adoption also helped better understand and predict the frequency ratio and severity ratio of claims.

In the year 2015, the company’s auto segment recorded an underwriting income of $23 million, three years after telematics adoption, the company reported an underwriting income of $1.68 billion in 2018. The loss ratio of the company’s auto segment also improved from 74.5 in 2015 to 66.2 in 2018.

Insurtech though has helped companies stand out in the market, the overall condition remains feeble because of the number of accidents that occur across the roads globally. The shift towards insurtech, with efforts of the government in formulating policies to raise awareness and pass ideal laws in their respective nations, shows signs of improvement.

Major auto insurance companies across the globe are considering technology solutions and other solutions to enhance driver experience, reduce the number of accidents and spread awareness about road safety. The shift despite being slow shows great promise for the auto insurance sector as well as road safety in the coming years.

The problem of road accidents impacts individuals, governments, the insurance sector, the auto sector, companies, and the economy. The problem though unequally divided based on various factors does persist globally. The world realizes the issue and is taking steps towards change yet falls short of achieving acceptable numbers.

The impact on human life cannot be monetarily defined but the impact on the economy and government is very evident from the steps taken by countries across the globe.

With the governments, insurance companies take a big chunk of the hit, which is clearly visible in the low underwriting gains in the top companies in the auto insurance sector in developed nations, they are adopting new ways to optimize the process of studying risk, claims and premiums.

Driver habits and related metrics will play a huge role in the coming decade to help facilitate the agendas of private and public players in curbing the leading cause of death in youngsters across the globe. 

Subscribe to Kruzr’s Newsletter!