You’ve probably heard about auto insurance companies offering discounts based on actual driving behavior (collected by a device plugged into the car). Progressive’s Snapshot discount is one such example that has been heavily promoted.
Why are insurance companies turning to these devices? One w0rd: risk. The more accurately they can gauge their risk of having a claim with any one driver, the better they can price that risk accordingly. Which in turn helps compete on price against competitors and protect their own bottom line.
Insurance companies of course are not new to the world of calculating risk, but these calculations have been traditionally based on demographics (e.g., age, sex), the marketplace, and other factors, which lumped a driver into a pool of similar drivers. Now, using tracking technology, insurers can better assess risk at the individual level. It’s the same as the difference between mass marketing and being able to market to an individual.*
Insurance companies can obviously benefit from this information, but so too are safe-driving consumers with better pricing. Some schemes even help improve driving behavior by providing feedback to the driver.
The ability to track, collect, and analyze data has been quickly ushering in a new era of data analytics. What large insurers are doing can be done, albeit on a different scale, with even small and mid-sized organizations.
For example, Corona has worked with our clients’ internal data, secondary sources (e.g., Census data), and data collected through additional market research (e.g., surveys) – often in concert with each other – to help…
- A higher education institution better understand factors that lead to a student passing or failing certification exams so they could better target areas for improvement.
- A national company identify upset customers who were likely to leave in order to reduce customer turnover.
- A county government better understand low income households, including factors contributing to poverty, services needed and other factors.
- Businesses determine where to locate or relocate based on where their customers come from, where the market is growing and other market characteristics.
These are just a few examples of the way Corona has used data to help our client make more informed decisions, and there are many more ways data, existing or new, can lead to better understanding and decision making. Just like Flo does.
*Interestingly, you can draw many parallels between this and online advertising, from better targeting to privacy concerns. The obvious difference here is that you have to opt-in currently to have your insurance company track you, whereas online the opposite is most often true.