The world of insurance is often considered one of the most challenging industries for ambitious entrepreneurs. Not only is there plenty of competition, but most people already have insurance companies they trust. To make things worse, insurance is often purchased begrudgingly by most small businesses, as they see it as a money sink due to a lack of a sufficient budget.
That said, there are some things that can allow even inexperienced insurers to get ahead of the competition. For example, some insurers have advanced to the point where they offer telematics insurance to clients managing a fleet of vehicles.
What is telematics?
Telematics combines telecommunications and informatics, a mix of telephone and computer services. Of course, there's much more to it than the name suggests, but at its core, telematics is a means to push the envelope of telecommunications and informatics.
What does telematics add to insurance?
To understand how telematics can affect insurance, it's a good idea to first talk about what makes some types of insurance rise above the rest of the competition. When you think about what people want from insurance, flexibility is typically at the top of the list. The ability to control how much you pay based on behavior is often called usage-based pricing, and there was a time when it was much too complicated for insurers to handle.
These days, adding telematics to the mix allows insurers to provide usage-based insurance (UBI) to clients willing to try it.
What is UBI?
Simply put, usage-based insurance gives people more control over how much they pay based on user behavior. The thing is, UBI is highly situational, which means it only works for policies where user behavior is a factor (outside of loyalty to the insurer).
For example, telematics insurance involves placing a device in the client's vehicle to gauge overall driver behavior. Such a thing was a revelation for insurers, as it offered a chance for the client to pay less based on best-practice methods on the road. Not only did it mean that a driver could effectively lower their insurance rates by driving safely, but it also meant they would save on fuel costs.
For a client looking to manage a fleet of vehicles, it is no surprise that UBI offers one of the best ways to tackle vehicle insurance while saving money.
Is telematics insurance popular?
There's no denying that UBI is growing in popularity due to how well the telematics device can gauge driver behavior. In addition, insurers are adding UBI to the lineup because many people demand more flexibility with prices.
The tricky thing is that insurance is not the easiest thing in the world to fit a flexible customer experience. As such, UBI currently utilizes a device to gauge driver behavior.
Of course, a powerful rating engine can help with real-time pricing, but telematics offers much more freedom with UBI. So it's wholly recommended for any business looking to take advantage of what vehicle insurance can do.
