Data holds the power to enable fairer insurance premiums in the insurance sector by ensuring the price is distributed more accurately and driving vital behavioural change
Fleet owners have long grappled with high insurance costs caused by the archaic way risk is calculated. Though insurance has always been an industry reliant on data, the challenge has been making use of more granular data, across different spectrums in real time, to be smarter and more transparent in distributing cost in a risk-transfer transaction.
Various waves of insurtech have sought to challenge the traditional structures of costing risk, including fractionalising the price through episodic-type insurance, such as toggling coverage in moments when risk exposure is higher. Yet, while policyholders save money, it is unsustainable for insurers, who effectively end up underpricing the exposure significantly.
Transforming the ways in which exposures are quantified and prices are distributed is one part of the puzzle. However, to reduce prices while also keeping insurers in business, there needs to be a way of reducing the exposure – and that can only happen by changing behaviours.
Data comes into its own in the next wave of insurtech by driving smarter decision-making on both sides of the fleet insurance equation. If insurers know what the insurer object is, where it is and what it’s exposed to at any point in time, they can distribute the price fairly. And if the insured understand how their actions impact their exposure, they can actively reduce it.
“Fleet insurance today is a 20-year-old product which calculates exposure by assuming next year will be the same as what happened in the last three years,” says Mark Musson, founder, CEO and chief product architect at fleet insurtech firm Humn. “Crucially, they distribute price evenly, despite the risk being so unevenly distributed. Some may be parked, others driving, some driven well, others less so, and some driving in more dangerous areas.
“You end up with many vehicles, with differing degrees of risk, sitting under one blanket policy. Data is the key to better fleet insurance pricing, but a pure-play tech solution is not the answer. You need to use data in two ways: figuring out the exposure and changing behaviour to reduce that exposure. The former without the latter fundamentally will not affect the end bill. You’ll still pay the same high prices because your exposure is still high.”
Humn is transforming fleet insurance through an intelligent platform that can granularly understand what’s going on across a fleet of vehicles in real time, and therefore accurately calculate exposure. Acting like a gas meter, it is constantly measuring the exposure of each vehicle within the fleet in order to more fairly distribute the price of insuring it against risk.
This is complemented by data insights that educate and empower drivers on how their behaviour influences insurance exposure. Both behavioural tools and behavioural psychologists in Humn’s team, meanwhile, engage risk managers with the overall exposure, as well as identifying the human, data and environmental ways to reduce that exposure.
When the price is distributed evenly, exposure is calculated accurately across the entire utilisation of the fleet and risk management tools are utilised, the price will typically be lower.
“It’s not a discount, it’s just a reflection of the reduction in the exposure,” says Musson. “That’s the power of our platform: the ability to understand and influence what the actual exposure is. The future of fleet insurance is dynamic pricing because it drives benefits for everyone in the value chain: better value for insurers and fleet owners, and safer roads.
“The future of fleets, meanwhile, is about automation, starting with longer-haul routes. We will shortly be releasing the first version of our autonomous vehicle insurance policy, which works on the same dynamic pricing principles. Ultimately, we are attempting to cover the whole supply chain and to do that you have to be able to address both the current, by moving to dynamic pricing, and then the future, which is autonomous vehicle insurance.”
For more information, visit humn.ai
Promoted by Humn