“Smart Driving Labs” Explains Ways of Saving Comprehensive Insurance
Last year was extremely difficult for insurance companies. According to the Central Bank and reporting of IFRS of major insurers despite 50% hike in rates and 13% increase in premium total revenues dropped by 20% and loss of clients that did not cause any losses was 29%. In 2015 only 7% of car owners purchased comprehensive insurance, which is much less as compared to other developed economies.
Current situation on car comprehensive insurance market when average policy price is RUB 52k, makes insurance unprofitable for those clients of insurance companies that have no history of accidents or insurance claims. And vice versa, people who often get into accidents greatly benefit from insurance which is not the case for insurance companies. In order to cover losses from paying to accident-prone drivers insurance companies are forced to continually increase their prices which discourages clients with good driving records who in reality pay for the first. It's a classic catch twenty two situation.
It happens so because insurers use obsolete risk assessment models. Currently practically all insurers on our market assess comprehensive insurance risks in a similar fashion. There are several basic factors, including car make and model, price and year of manufacture, age and driving experience. Sometimes they also use information about marital status and number of children, but these data practically have no influence on total score. Such a limited set of factors for analysis does not allow to create a precise risk assessment system.
“It’s a huge problem and if such situation continues on insurance companies will keep on losing clients with good driving record and will be left with ‘bad’ clients and inevitably face the problem of increasing rates to cover losses incurred”, said Aleksandr Morozov. According to the expert from “Smart Driving Labs” this is a way to nowhere. To turn the current tide we need to develop new approaches to risk assessment and start collecting additional data and offer each client such rates that reflect the level of their risk.
“New screening models have to be customized and take into account all aspects that impact risk level of a specific client”, Aleksandr Morozov noted.
To crease such screenings we need relevant technologies that take into account peculiarities of Russian market. That is why “Smart Driving Labs” developed its own telematics platform enabling collection of vehicle usage data that is subject to assessment. The system was created by Russian experts for Russian market and meets the requirements of Russian consumers to the greatest possible extent. In particular, the solution of “Smart Driving Labs” uses proprietary mapping that is constantly updated and takes into account peculiarities of insurance telematics.
Application of similar tools will allow insurance companies to create more accurate risk assessment models. And this will lead to substantial reduction in comprehensive insurance rates for ‘good’ clients and seriously increase them for those who cause losses.
Aleksandr Morozov’s speech provoked a lively reaction in the audience as the problem of absence of proper screening is one of the most pressing for today’s market of insurance telematics. Resolution of this problem will lead to formation of completely new level of vehicle insurance in Russia. Clients with good driving record will not have to pay for careless drivers and insurance companies will be able to attract more new clients with their beneficial customized offers, and, finally, the market will start growing.