1. Telematics – The game changer
for Motor Insurance
Matteo Carbone
Principal, Bain
Founder and responsible of the Connencted Insurance Observatory

2. I founded a think thank on telematics,
connected insurance and innovation
Matteo Carbone, 28 April 2016

3. I founded a think thank on telematics,
connected insurance and innovation
Matteo Carbone, 28 April 2016

4. 0
5
10
15
20%
Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15
Telematics penetration on Motor third party liability contracts renewed and sold in the period
Source: Bain elaboration on "Clausole sulla Black-Box: trend temporali e canali di selezione/controllo dei rischi", Marco
Cosconati. Observatory on telematics connected insurance & innovation
Insurance telematics is growing
Note: Cars personal line (not included motorcycles, boats, trucks and commercial lines), representing 70% of the MTPL contracts
Matteo Carbone, 28 April 2016
6 players with
a penetration
>10%
10 players with
a penetration
>10%

5. Source: Bain elaboration on "Clausole sulla Black-Box: trend temporali e canali di selezione/controllo dei rischi", Marco Cosconati.
Observatory on telematics connected insurance & innovation
Telematics penetration is correlated to the
level of MTPL premiums
Note: Cars personal line (not included motorcycles, boats, trucks and commercial lines), representing 70% of the MTPL contracts
Telematics penetration by district – Q4 2015
Average district MTPL premiums
Telematics
penetration
Matteo Carbone, 28 April 2016

6. <€400 51%
€400-€500 21%
€500-€600 13%
€600-€900 13%
>€900 3%
Total 100%
Telematics is not only for the highest
premiums
Source: Bain elaboration on "Clausole sulla Black-Box: trend temporali e canali di selezione/controllo dei rischi", Marco Cosconati.
Observatory on telematics connected insurance & innovation
Note: Cars personal line (not included motorcycles, boats, trucks and commercial lines), representing 70% of the MTPL contracts
Market breakdown by MTPL premium level
Telematics
penetration
16%
26%
22%
18%
16%
13%
Matteo Carbone, 28 April 2016

7. The client perspective
ILLUSTRATIVE
Source: Observatory on telematics, connected insurance & innovation
MTPL +
theft (discounted) + black box MTPL (discounted) + black box
When the increase of value is positive and material, there is an effective
use case for the client and a selling speech for the distributor
Matteo Carbone, 28 April 2016

8. Why motor insurance telematics?
“I am the Career Genie.
I grant 3 wishes that help people
along with their jobs.”
“For my first wish, I would like safe drivers to buy
my Motor insurance product”
Source: From an Andrew Dart's article originally appeared in the Asia Insurance Review, September 2014 edition
Image: Courtesy from cliparts.co
"Genie, I'm an Insurance CEO"
“It’s done, now you have the black box”
Matteo Carbone, 28 April 2016

9. Average
Traditional Black box
Risky clusters
Traditional
Black box
The insurer perspective:
benefits on the insurance bottom line
Source: Bain Experiences
Claims frequency
Matteo Carbone, 28 April 2016

10. Why motor insurance telematics?
“I am the Career Genie.
I grant 3 wishes that help people
along with their jobs.”
“For my first wish, I would like safe drivers to buy
my Motor insurance product”
“OK Genie, for my next wish, I want you to reduce
claims costs and fraud – make my motor line of
business really profitable”
Source: From an Andrew Dart's article originally appeared in the Asia Insurance Review, September 2014 edition
Image: Courtesy from cliparts.co
"Genie, I'm an Insurance CEO"
“It’s done, now you have the black box”
“Your wish is granted, your claims handlers will
receives the telematics data real time”
Matteo Carbone, 28 April 2016

11. The insurer perspective:
benefits on the insurance bottom line
Source: Bain Experiences
Matteo Carbone, 28 April 2016
Saving acheived
controling the
claims value chain
>10%
Claim cost
reduction full
potential
>25%

12. Why motor insurance telematics?
“I am the Career Genie.
I grant 3 wishes that help people
along with their jobs.”
“For my first wish, I would like safe drivers to buy
my Motor insurance product”
“OK Genie, for my next wish, I want you to reduce
claims costs and fraud – make my motor line of
business really profitable”
“OK Genie, for my last wish, I want to find a way charge more
premium for dangerous drivers before they have an accident”
Source: From an Andrew Dart's article originally appeared in the Asia Insurance Review, September 2014 edition
Image: Courtesy from cliparts.co
Leave-in telematics: a better way to manage the insurance business
"Genie, I'm an Insurance CEO"
“It’s done, now you have the black box”
“Your wish is granted, your claims handlers will
receives the telematics data real time”
“Your wish is my command, you have a
behavioral-based tariff”
Matteo Carbone, 28 April 2016

13. OUTSOURCING
POSITIVE
IMPACT OF
TELEMATICS
ON BOTTOM
LINE
• Ability of box to auto-select
risks and influence behaviors
• Efficiency of information usage in
the claims handling process
• Usage of TSPs allowed to:
- achieve relevant quick wins with
limited investments and limited
impact on the system
- have direct access to innovation
• Effectiveness of the commercial act
which is maximized by:
- Visual effect of the reach of the RCA
discount
- Explicit cost paid by the client (mix of
rate, services and assistance premiums)
• Remuneration to the intermediaries
The best practices build the business case on
the value sharing both with the clients and
the intermediaries
Traditional
lifetime
value
Benefits for
insurance
bottom line
Services &
assistance
rate
Customer
discount
TSP
Lifetime
value
telematics
Company
LTV
Telematics business case
1
1
2
3
5
2
3 5
4
4
ILLUSTRATIVE
Intermediary
INTERMEDIARY
COMMITMENT
Source: Bain Experiences
Matteo Carbone, 28 April 2016

14. Frequency of interaction
Source: Bain/Research Now Global Insurance Customer Centricity Survey 2013
2
ILLUSTRATIVE
Lifetime
value
telematics
Traditional
lifetime
value
Benefits for
insurance
bottom line
Services &
assistance
rate
Customer
discount
TSP
Lifetime
value
telematics
Company
LTV
Telematics business caseInteraction & NPS
Matteo Carbone, 28 April 2016

15. Frequency of interaction
Motor insurance services benchmarking
2
Weather alert
based on geo-
localization
5
Antitheft service if
the box registers a
different-than-
usual driving style
3
"Live" concierge
supporting
navigation
1
Alert if the vehicle exits a
"safe area" (or enters an
"unsafe area") of the city,
defined by the client (e.g.
parental control options)
4
Highway/ parking
area tolling
6
While driving
In case of crash
When parked
Road or
medical
assistance via
dedicated
button
7
Simplified claim
notification,
including
automatic form
fill-in based on
telematics data
8
Damages
Photo
Claims feature
Claim
certification
at client's
disposal
Automatic
assistance to
the client on
the premises in
case of severe
accident9
10
11
Client assistance and
personalized case
management in case of crash
Parking
localization
Street
sweeping
alerts
Alert if the car
is hit when
parked
Antitheft service if
the box is removed/
uninstalled
Alert in case the
vehicle is moved when
the engine is off (e.g.
tow-away)
14
15
16
13
12
Stolen
vehicle
recovery
17
Source: Observatory on telematics, connected insurance & innovation
Alert in case
speed limits are
exceeded
2
Matteo Carbone, 28 April 2016

16. Basic black-box PAYD PHYD
0
20
40
60
80
100%
10
Premium adjustment
17 9
At renewal
At renewal
Premium
adjustment
Tariff benchmarking – March '16
Number of products
Source: Observatory on telematics, connected insurance & innovation
Telematics is not (only) Usage Based
Insurance
Market offer evolution
Number of products
Flat
discount
Matteo Carbone, 28 April 2016

17. Why risk-based pricing?
Premium adjustment
based on the behaviors,
with a mechanism
understandable and
communicable
Risk-based pricing to offer a
competitive renewal rate to the
low risk client, in order to retain
them and improve the technical
profitability of the auto insurance
telematics portfolio
To make clients
less risky
To make clients
less risky
To retain
low risk clients
To retain
low risk clients
• How to engage the client?
• Is a discount on the
insurance rate at renewal
enough?
• Other reward could be used?
• Which variables are really effective
to identify the low risk clients?
• With the discount diffusion on the
low risk clients, how to manage the
technical equilibrium of the part of
the portfolio without telematics?
Source: Observatory on telematics, connected insurance & innovation
Matteo Carbone, 28 April 2016
To introduce new pay-
per-use proposition
To introduce new pay-
per-use proposition
• Is this what the consumer
want?
• Who is the target client?
• Which is the correct
distribution channel to
distribute it?
New value propositions
based on innovative (and
fair) model with variable
payments along the year
based on the actual
personal level of risk

18. The insurer can keep more value with use
cases based on a broad suite of services and
rewards
Economics telematics to be
Traditional
lifetime
value
Cross
selling
Discounts/cash back
to the client
Fee for ecosystem
of partners
Fee for the
intermediary
Lifetime
value
telematics
LTV for the
Company
Benefits on
the
insurance
bottom line
Services &
assistance
fees
Source: Observatory on telematics, connected insurance & innovation
Matteo Carbone, 28 April 2016

19. The insurance usage of the telematics
technology is far to the maturity
Source: Observatory on telematics, connected insurance & innovation
Matteo Carbone, 28 April 2016

20. The lack of a clear strategy limit the achievement
of the full potential of the telematics
Costs
Data
management
complexity
Privacy
Lack of a clear
strategy
Barriers to the
telematics development
11%
34%
22%
34%
Source: Observatory on telematics, connected insurance & innovation
Matteo Carbone, 28 April 2016

21. Telematics
strategy
Value
proposition
What strategic goal to achieve by introducing
connected insurance?
How to position the product within the current
product offer? What target client to reach?
Strategy first!
Hardware and
operating
model
•Which user experience at sales point?
•What pricing approach to introduce at underwriting and
renewal?
•What services and loyalty systems to include in the
product?
•How to leverage the communication channel with client?
• Which data and how structure the data gathering approach?
• What devices and which delivery user experience?
• How to evolve processes to strengthen the effectiveness of the impacted Company
functions? (e.g. claims, actuarial, UW…)
• How to capitalize on the cumulated experiences and activate a path of continuous
improvement?
Matteo Carbone, 28 April 2016

22. Matteo Carbone
Matteo.carbone@bain.it
+393346220378
@MCins_
Matteo Carbone, 28 April 2016