insurance

INSURANCE

How to think about Telematics and Insurance Premiums

Broadly speaking, insurance premiums get divided up for the following 3 purposes:

Risk Pool

This is the main purpose of insurance premium. Premiums from many insured policy holders are pooled in order to assist the insured in the event of a loss, ultimately with the goal of putting them back into the same position, as if the event never happened. We as the insured forego our hard-earned money in the short-term for the assurance that we will be able to recover from an unforeseen loss in the long-term. Through this measure, risk is effectively financed.

Administrative Costs

A portion of Premium must go to the costs of running an insurance business. The Premium is primarily for the purpose of paying a claim but there still needs to be a claims technician who administers this process. In addition, there needs to be underwriters who are responsible for calculating an appropriate premium for the purpose of financing the risk. These people need to sit at a desk in an office and so on and so forth…

Value Added Products (VAP's)

A portion of premium can go to the purpose of adding value outside of the core function of risk financing. Many of these VAPs have become standard and are expected from consumers, for example Roadside Assistance is standard on many Motor policies. Many of these functions are outsourced by insurance companies with a set amount of Premium allocated to this purpose.

Incorporating Telematics into insurance premiums can be fraught with difficulty. The reason for this is that there is a fundamental misalignment between the income structure of an insurance company and that of a telematics company :

A telematics company is financing an asset to the client. The telematics device fitted to the vehicle is an asset with a value that needs to get paid for. There is no simple way to account for this in an insurance structure.
The telematics device is usually paid off over time. This requires telematics companies to legitimately bind consumers to a thirty-six month contract. In contrast, legislation forbids insurers from binding a short-term policy holder to a fixed-term contract.

The result of these two factors is that telematics companies and insurers have fundamentally different ways of interacting with their clients. The result of this is an insurmountable misalignment in practice.

How to bridge the gap?

At Gullwing, it is our fundamental practice that insurers and telematics companies should each contract separately to the consumer. This does not mean that the goals of telematics based insurance need to be lost. Gullwing can function as a service provider to our insurance clients by aggregating data from multiple telematics companies as well as mobile device applications. This data is then presented as one single, uniform data set according to our client’s specifications.
SOLUTION

So where do Gullwing’s services fit into the insurance Premium split?

It is our goal to influence all aspects of insurance:

Risk Pool

By providing meaningful risk data, we can influence the profitability of an insurance book and influence how the Risk Pool is made up.

Administrative Costs

Gullwing is positioned both as a claims and underwriting service provider. We can assist in the validation of claims events as well as influencing underwriting practices by measuring risk on moving assets.

VAP's

It is our goal to add value to the policy holder by increasing the value gained from their telematics device by linking it to their insurance policy and assisting in unlocking benefits from their insurer.