Insurers across Africa are facing many challenges when it comes to motor insurance but the biggest problem has been lack of data to offer risk-based pricing to their customers.
In Kenya, motor has been a loss-making enterprise over the last eight years. According to the Kenyan Regulator, IRA, 81% of motor insurance books made underwriting losses in 2019 with industry claims ratio standing at 69% in the motor private class in 2018.
When AiCare surveyed key players in the motor insurance sector including underwriters, the regulator (IRA) and the umbrella body (AKI) to get an unbiased view of what has driven the losses in the industry. The following were the main reasons cited.
- Competition – many underwriters felt pressure to lower rates in a bid to remain competitive. This led to rates in the market that are below what the actuaries calculate to be the risk brought in by the insureds.
- Lack of Data – Underwriters complained about a lack of good data to enable them to offer individualized risk premiums to insureds. This problem was exacerbated by the heavy intermediation in the industry that has left underwriters at the mercy of intermediaries when it comes to collecting data on the insureds.
- Fraudulent Claims – Across the board, there was general agreement that fraudulent claims were rampant in the industry. Estimates ranged from as low as 10% to as high as 40% of claims thought to be fraudulent.
How AiCare is bringing back profitability to motor insurance in Africa with telematics
- Data: Utilizing data from AiCare’s platform, helps create individualized data banks on risk and customers based on a combination of internal data and telematics data. This allows the development of new risk models which can be incorporated with economic models for decision making on specific insurance products and the identification of cross-selling opportunities.
- Bottom Line: Increasing profitability through specialization with the ability to offer risk selection, risk-based pricing, influence driving behaviour and use collected data efficiently during the claims process; reducing claims and fraud.
- Customer Engagement: The insurer benefits from enhancing connectivity with the customer through improved customer engagement, customer loyalty and ultimately the opportunity to offer additional services such as roadside assistance.
Risk-Based Pricing
AiCare facilitates ongoing monitoring of the quantity and level of risk exposure throughout the policy. This is drawn from AiCare’s scoring risk rating which is calculated based on vehicle information such as; Acceleration, Braking, Cornering, Speed, Overspeeding and Fatigue.
With Risk-Based Pricing and Usage-Based Pricing (UBI) motor insurance policyholders are in control of how much they pay for premiums because it is their driving behaviour that determines how much they will pay. Policyholders also enjoy dynamic insurance products including Pay As You Drive (PAYD), Pay How You Drive (PHYD) and Pay Per Trip (PPT).
Risk Selection
This enables risk selection when acquiring new clients or when renewing a policy. These solutions take advantage of the auto-selection and determining risky behaviour bias which typically characterizes a product requiring the installation of the AiCare Telematics device.
Motor insurance featuring continuous telematics monitoring is generally not attractive to risky clients and thus tends to counteract adverse selection and fraudulent intents.
Additional Services & Cross-Selling
Having additional services based on the AiCare telematics data collected helps insurers increase customer retention and profitability, unlike traditional motor. In a survey we conducted, we found that policyholders appreciated additional services like emergency and roadside rescue.
Claims (Loss Control)
Typically underwriting has driven the conversation or been at the centre of telematics programs globally. Lowering claims has been reported as the biggest driver of AiCare’s telematics solution. We help the insurer reduce claims costs by about 20% with risk reduction of 8-18%.
First Notification of Loss: One of the major benefits of our wired device is the ability to detect accidents at the first instant. The insurer gets prompt notification of the collision.
Accident Reconstruction: We provide accurate and detailed data on the location of the accident, point of impact, the speed at the point of impact and severity of impact.
Expedited Claims Process: We expedite the use of data using the telematics device to develop a faster more efficient claims management process.
Reduce the risk of fraudulent claims: The data we provide gives information about the driver and driving style before the crash which can be used in a court as evidence.
Driving Behaviour Rewards Program
AiCare couples telematics offering with a gamification based reward program which can be adapted into an existing reward system with insurers or as a stand-alone product. With AiCare’s gamification reward system, insurers create an ecosystem and community based on rewarding good driving and enticing new policyholders to join the rewards program.