Telematics insurance can improve customer retention

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Customer retention in insurance is hard. Thanks to the advent of comparison websites, everyone with even a modicum of computer know-how can get online, find the best deal down to the individual pound and switch their policy at renewal without much hassle. And why shouldn’t they? A lot of the times insurers aren’t loyal, offering better deals to new customers and similar. However with telematics, customer retention for insurance is on the rise, as that extra data and improved driver scores make it worthwhile to keep well behaved drivers around.

According to a new report for analyst firm Corporate Insight, called “Plug-Ins Receive a Road Test – Tracking Telematics Programs,” that looked into what customers thought of their telematics enabled insurance policies, found that people tended to like the black box system and that their driving improved because of it. Thanks to that and the fact that telematics providers often offer extra discounts to safe drivers on renewal, retention rates are rising.

The two firms that were studied as part of the report were Progressive and State Farm, both of which saw similar results when it came to their customer retention rates.

progressive

Also noted as part of the study however, were aspects of their telematic device and policy, which they weren’t so keen on. For example, most people found interruptions from the device, such as live warnings about speeding or acceleration irritating and distracting. Some even considered the devices a little too sensitive for their liking, coming alive and warning of problems at the slighest disturbence. However, those same people were quite happy having weekly reports on their performance.

Some people questioned whether the devices needed to be smarter still, or at least factor in that sometimes heavy acceleration and braking might be necessary. For example, one participant braked sharply to avoid hitting a child that had run into the road and yet was called out by the application for dangerous driving.

Out of the two companies tested, the scheme that pleased more drivers was State Farms, because it offered quarterly discounts and cashback for those that drove safely, while Progressive’s merely looked to offer tips for safer driving, with the potential for a discount on renewal. Star Farm also offers more options to consumers, letting them choose their level of telematics to give them different statistics. At the basic level, it offers just location and fuel tracking, but as you go up to the more comprehensive – and costly – packages, it tracks much more about the user.

The key part of the study however, is that after using the telematics devices for the 30 day trial period, many of the participants are still making use of their telematics devices to help improve their driving, safety and fuel economy. It seems likely that a good number will remain with their insurer next year if they are able to secure some strong savings from the use of the devices.

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Jon Martindale is an English author and journalist, who's written for a number of high-profile technology news outlets, covering everything from the latest hardware and software releases, to hacking scandals and online activism.