Auto Insurance Game Changer #3: Methods to Motivate Safe Driving
While an increase in smartphone ownership has introduced problems in auto insurance, advancements in telematics technology are revolutionizing auto insurance and its role in the mobile world today. This five-part blog series addresses the problems facing auto insurance and the Game Changers solving them.
Game Changer #1: Leveling up with Artificial Intelligence and IoT
Game Changer #2: Assessing Phone Distraction
Problem: How can insurers influence behavior change?
The previous Game Changer blog discusses how insurers can use smartphone telematics to detect phone use behind the wheel to more accurately assess a driver’s risk. The next step is implementing engagement methods to motivate safer driving behaviors from their policyholders.
To achieve long-term behavior change, it is essential for the driver to continuously engage with the app. Gamification combines intrinsic and extrinsic motivations and applies game-like elements to non-game products or services to encourage engagement. The following methods fall under gamification and appeal to intrinsic and/or extrinsic motivations.
Immediate and actionable feedback appeals to the innate inclination to problem solve and empowers drivers to improve. After a trip is completed, the driver can view a map of their route, where risky driving events occurred, and scores for the trip and individual driving behaviors like phone distraction and speeding. They can also follow their trends across their overall and individual driving behaviors, and receive tips on how to improve.
In-app competition features appeal to the social motivation to connect with and be accepted by other people. Friends and family leaderboards hold drivers accountable for their behaviors, while short-term contests keep the driver coming back to the app.
Variable incentives for safe and improved driving keep the driver engaged and delighted with the program. For example, a rewards program regularly awards drivers points based on how safely they drive. Depending on the program, rewards can be redeemed in the form of gift cards, donations, gas vouchers, or services like tire repairs. Unlike discount-based programs that traditionally only create one annual touchpoint at time of price renewal, rewards-based programs generate frequent touch points between the insurer and policyholder.
A driving behavior program by an insurer in South Africa rewards users for safe driving behaviors and achieving goals. Rewards can go toward fuel credits, Uber trips, and car maintenance services. The more engaged the driver, the better their rewards. The insurer’s policyholders who are part of the driving behavior program pose less crash risk than those who aren’t:
- Users achieve an average of 17% improvement in driving behavior within one month
- Customers who remain in the program result in a 25% lower absolute loss ratio compared with customers who leave
- The program has a 17% lower loss ratio on matured book compared with top four personal lines competitors (Source)
Game Changer: Smartphone telematics positions insurers to have a more active role in changing the risk they are covering. Engagement methods like personalized feedback, competition, and incentives promote behavior change and long-term improvements.
Next Game Changer: The claims process can be automated to reduce costs