The State of

Insurance
Te le m at i c s
Challenges, Opportunities,
Adoption, and ROI
 1 Introduction
2 Current State of Adoption
5 Market Barriers
10 Internal Barriers
14 Benefits of Telematics to the Carrier
18 Future
Introduction
As the telematics industry contin-
ues to evolve with rapid adoption
within the auto industry, new and
innovative partnerships are devel-
oping between auto manufactur-
ers, insurers, telematics solution
providers (TSP) and device OEMs,
to take advantage of this data
driven technology. Though earliest
adoption focused on usage-based
insurance (UBI), today the benefits
have expanded to include safety,
fraud prevention, improved claims
efficiency and enhanced service
offerings. As a growing number of
constituents enter the industry, we
step back to examine whether the
insurance industry has kept pace.
In this whitepaper, we will explore
the current state of the insurance
industry’s adoption and implemen-
tation of telematics. Through
a survey of senior managers
and executives of US property
casualty and multi-line insur-
ers, we identify the barriers
to implementation at all
phases of adoption and the
resulting benefits realized.
The respondents to this
survey, conducted by
Carrier Management,
represent a balanced
cross section of carriers
by size, and by telematics
maturity, with the major-
ity (84%) offering auto
insurance products. For
this paper we will focus
on auto insurance carri-
er responses.
“The largest insurance
carriers have adopted
telematics and most are
exploring new and ex-
citing ways to leverage
the technology. What
we’ve noticed recent-
ly is that smaller carriers
are entering the space
and seeing a great deal
of benefit from telematics.
We’re really excited to see
the industry maturing.”
Nino Tarantino
Chief Executive Officer
Octo North America
1
Current State of Adoption
Historically, technological advanc-
es have been led by those with the
resources to support innovation, as
well as market share to capitalize
upon the endeavor. As such, it is not
surprising that 60% of respondents
whose companies have implement-
ed telematics are Tier 1 carriers.
Figures 1-3 illustrate the telematics
maturity of the respondents rela-
tive to carrier size. It is clear that
Tier 1 carriers are far more mature
with respect to telematics adoption
than are smaller insurers, with 54%
having implemented programs in at
least a few states, in contrast to Tier
2 (32%) and Tier 3 (25%) insur-
ers. Viewing these graphs side by
side, Tier 1 carriers can be seen as
paving the way and generally de-
scribed as ‘implementing’ telemat-
ics, while Tier 2 carriers are less
mature with 32% implementing
and 43% researching. There
are innovators among Tier 3
carriers that have implemented
telematics (25%), though there
remains a major gap between
these carriers and a large
portion of their peers who have
still not begun to explore the
opportunity (45%).
Of those insurers who plan to
implement telematics, but who
have not yet done so, 82% in-
tend to do so within the next 2
years. Insurers who are actively
piloting telematics indicate a
shorter timeline of 6 month to
implementation, where prog-
ress accelerates. In contrast,
2
those in the research phase an- Figure 4: Device Portfolio
ticipate a path to implementation
anywhere from 6 to 18 months.

With advancements in vendor

services, the trend in adoption is
expected to accelerate among
the Tier 2 and 3 carriers as earlier
financial and technical barriers are
lifted. Turnkey programs provided
by telematics service providers
(TSP) coupled with lowering costs of
devices and new options, encour-
age entry into telematics at a lower
investment point. Further, providers
with vast implementation experi-
ence can provide expertise to car- adoption. Those working with such the dongle, used by 74% of insurers.
riers that may not exist internally, a vendor remove the challenges Interestingly, as illustrated in Figure
reducing reliance upon and cost of associated with gathering sufficient 4, about one third of insurers seem
internal talent. Lastly, a vendor with internal driver data to build reliable to only support data collection from
proven telematics analytics capabil- statistical risk models, experienced a dongle with smartphone-only
ities and a wealth of data to deliver by early adopters. data collection supported by just
insights into driver risk, crash re- 9% of insurers. As expected, most
construction and claim processing, The most common device used for insurers support data collection
provides for rapid advancement in telematics data collection, by far, is from multiple devices, with the

3
dongle and smartphone portfolio
being the most common (26%).
Survey responses indicate that
regardless of stage of telematics
maturity, 62% leverage external
support from TSP and 3rd party
vendors to score their telematics
data. The data insurers collect on
driver behavior is, for the most part,
new to insurers. As such, they tend
to rely on TSPs or other 3rd party
vendors to effectively incorporate
driver scoring variables into their
risk pricing models.
The stages of maturity provide not
only an indication of the current
landscape, but a reference point for
a further examination of barriers to
implementation. Analyzing re-
sponses to internal and market bar-
riers reveals differing perceptions
based upon phase of adoption. This
provides us with an indication of the
significant challenges faced at each
stage, and those that are overriding
throughout the process.
4
Market Barriers
Figure 5 illustrates the perceptions Contrary to concerns, market data between product, marketing and
of survey respondents when asked suggests that 72% of millennials sales can achieve great success
to select top market barriers to tele- and more than half of all drivers with policyholders. Concerns over
matics implementation. Viewing the believe UBI is a fair way to achieve policyholder acceptance, are in
results, in conjunction with correlat- more reasonable insurance rates. fact, lowest among survey respon-
ed stages of telematics adoption, Communication and coordination dents with highest participation
reveals shifts in concern throughout
the implementation process.
Figure 5: Market Adoption Barriers
Policyholder Adoption
The concern of low policyholder
adoption, while acknowledged at all
stages, is felt greatest by those en-
tering and performing pilots. At this
stage, the concern for whether the
market will respond is a great un-
known, diminished by pilot results
and subsequent adjustments to the
offering, messaging and sales sup-
port, as full scale implementation
occurs.

5
from their sales and marketing
departments. As we will discuss lat-
er, those insurers with the highest
sales and marketing engagement
in telematics realize far greater
outcomes in regards to policy-
holder acquisition, retention, and
satisfaction.
The go-to–market strategy must
target a meaningful, well defined
population of potential participants
that will find sufficient benefit in
trade for loss of privacy. In addition
to promises of savings, innovative
programs are now embracing gam-
ification, creating community level
competition for safe driving and a
promise of enhanced services in
exchange for the data collected.
Providing a very clear explanation
of what data is collected and how
it is utilized is paramount. Finally,
choose wisely the devices, appli-
cations and technology to support
data collection, as newly acquired
policyholders may have a short
attention span and limited patience
for technology that does not work
as promised.
Find the Right Partner
Finding the right telematics partner
is seen as a market barrier by 16%
of the respondents, the majority of
which are in the pilot phase. Having
seen their way through the process
of choosing a partner, this step in
adoption is viewed, in hindsight, as
a major challenge. We have found
that many insurers struggle to find
success with a first pilot, particular-
ly when working with technology
providers lacking real implementa-
tion experience. Telematics is well
and truly outside the expertise of
all but the most innovative insurers,
so the right partnerships are critical
to program success. Interestingly,
the challenge of finding the right
telematics partner is consistent
across telematics maturities and
regardless of organization size.
If you are challenged by this barri-
er, what should you focus on when
choosing a partner?
• Implementation experience –
Seek a partner that has proven
experience supporting carriers
though all phases of implemen-
tation; from initial budgeting, to
internal buy-in to pilot planning,
regulatory approval and beyond.
• Data collection – As the market-
place becomes increasingly inter-
connected, a partner that pro-
vides a device-agnostic platform
for data collection from multiple
sources is critical.
• Analytics – Your provider should
have proven analytics capabilities
to deliver behavioral and con-
textual insights, in addition to fact
6
 based insights to take full advan-
tage of the data collected.
• Data Security – Your solution
partner’s ability to demonstrate
the highest level of security in
collecting, analyzing and storing
your data should be given great
consideration.
• Innovation – Seek a provider with
vision for the future and an engi-
neering and R&D staff to support
its vision, so that your business
evolves at the pace required to
remain relevant and competitive.
• Training/Support – Find a partner
that understands your business
lines and operations. A provider
that can support all aspects of
your development and go-to-
market strategy will ensure your
success with your telematics
program.
Ultimately, you are seeking a
viable partner who will be there
to support and service your pro-
gram needs, aid in product devel-
opment and guide the go-to-mar-
ket strategy.
Regulatory Environment
Regulatory concerns are expressed
by 11% of the respondent, the ma-
jority of which have also indicated
that their companies have rolled
out telematics programs in limit-
ed geographic markets. Very few
insurers who are in the early stag-
es of telematics maturity cite the
regulatory environment as a barrier
to launching a telematics program.
Given the level of concern with
regulatory challenges facing those
who have implemented telemat-
ics, this may suggest that insurers
starting out with telematics are un-
derestimating that challenge. The
challenge faced by any newcomer
to telematics is gathering sufficient
data to support new rating policies
in order to meet state require-
ments. Most states require rate ap-
proval based upon statistical data in
support of the proposed new rating
structure.
It is a daunting task to collect
sufficient accident data to prove
statistically, for example, that hard
braking is correlated with acci-
dents. Further, imagine the gran-
ular data required to establish the
threshold at which hard braking is
considered a minor risk factor vs. a
major risk factor. For those working
with a well-chosen TSP, this barri-
er is overcome by the driving data
already collected. Your TSP should
have sufficient, proven experienc-
ing aiding in the regulatory approv-
al process.
As of May 2017, OCTO had accumu-
lated data from 5 million connected
users on 155 billion miles of driving
7
 Figure 6: Market Adoption Barriers by Tier

data and 397,000 crashes, with
extensive experience supporting
UBI approval across the US.
Prohibitive costs
Prohibitive costs represent the 2nd
most cited market barrier. This bar-
rier is seen as the greatest concern
among those researching telemat-
ics (23%) with, presumably precon-
ceived ideas of the cost to acquire
devices and technology in support
of a program. Consistent with this
theory, lowest concern is select-
ed among respondents seeking a
telematics partner (3.85%), as these
respondents have determined to
follow a ‘buy’ vs. ‘build’ strategy.
Illustrated in Figure 6, large, Tier
1 insurers cite program cost as a

8
major market barrier far less often
than their smaller competitors, like-
ly because the cost of developing a
telematics program can be spread
across a greater number of policy- “While there are common per-
holders. With this in mind, it is not ceived barriers facing insurers
surprising that Tier 1 insurers over- regardless of size or phase of
whelming cite policyholder accep- adoption, our analysis shows that
tance as their primary concern for
each program comes with its own
the investment made. While some
unique challenges. An experi-
Tier 1 companies may opt to commit
the resources to build their own enced telematics service provider,
proprietary programs, the ‘buy’ vs. like Octo, is able to anticipate these
‘build’ method of entry reduces cost challenges and help you address
barriers considerably, creating new them proactively, before they be-
opportunities for Tier 2 and Tier 3
companies. Costs associated with come problematic.”
software, platform and device de- Nino Tarantino
velopment; data collection, analysis Chief Executive Officer
and scoring; lack of experience; Octo North America
can all be avoided with the ‘buy’
strategy and right partner selection.

9
Internal Barriers
Figure 7 illustrates respondents’ financial win associated with a fully a cumulative positive ROI. This is
ranking of internal barriers to implemented telematics program. fully realized when a carrier imple-
adoption of telematics. Similar to ments not only a UBI program, but
market barriers, different internal Industry experience confirms a capitalizes on the real-time data for
barriers are recognized as adoption combined benefit of increased improved claims processing, crash
progresses. revenue, reduced claims costs and reconstruction and fraud preven-
lower internal costs that result in tion. By influencing the driving
Proving ROI
The most significant internal bar- Figure 7: Internal Barriers to Telematics
rier, cited by 36% of respondents,
is proof of ROI. Of those respon-
dents in the research phase, 40%
identified this as the greatest bar-
rier, similar to concerns over cost.
Likewise, 58% of respondents in
the adoption phase of ramping up
a program post-pilot identified this
barrier. In our estimation, at each
of these stages, proof of concept is
still in question without the ability
to garner historic evidence of the

10
behavior of this improved risk pool, Figure 8: Product Lines Supported
lower payouts are experienced, but
of greater benefit may be the im-
pact that telematics is having upon
customer engagement and the
claims processing experience.

Specifically within the commercial

auto insurance lines, where com-
bined ratio has increased to an av-
erage of 110% over the last 5 years,
carriers have realized significant
improvement after implementing
telematics. Fleets have seen 20-
30% fewer accidents, reductions in
fraud, and 15% fewer incidents of
speeding. By monitoring commer-
cial drivers’ behavior, providing fleet
managers with critical capabilities,
and better pricing risk, insurers can
realize significant improvements in
their commercial lines combined
ratio. The benefits experienced by
commercial fleets utilizing these
affordable fleet management capa-
bilities include reduced fuel costs,
better personnel and asset utiliza-
tion, and reduced vehicle mainte-
nance costs. The overall increase
in fleet productivity, coupled with
savings creates greater loyalty and
engagement with their carriers.
As seen in Figure 8, with less than
40% of insurers reporting use of
telematics to support commercial
lines of business, fast-moving car-
riers may be able to realize signifi-
cant growth by offering fleet man-
agement capabilities, supported by
telematics programs to commercial
customers.
As of the date of this survey, as seen
in Figure 9, the vast majority of
respondents are still predominately
focused upon UBI (76%) and poli-
cyholder services (47%) while only
11% are utilizing telematics for crash
and claims management. Telemat-

11
ics-driven crash and claims man-
agement is in its infancy in the Unit-
ed States, with only Octo Telematics
offering crash and claims man-
agement services backed by the
reliability and accuracy of a dongle.
Hence, the full benefit of telematics,
and subsequent proof of ROI, are
still unrealized by many of these
respondents. Later in this report,
we will discuss the results insurers
have reported from implementing
telematics.
this barrier can be overcome by
choosing a partner that sets the
highest standard of data security.
How to determine the security of
your data?
• Can the provider demonstrate its
policies and procedures to the
satisfaction of your governance
Figure 9: Capabilities Supported
and compliance team?
• Can they produce certifications
such as ISO 9001 and compliance
with ISO/IEC 2701:2006?
• Does the provider engage in regu-
lar security assessments and audits
by an independent third party?
Performing your most vigilant
vendor assessment with an expe-

Data Storage
Concern for data storage, manage-
ment and security is shared evenly
across carriers at all stages of adop-
tion, with exception to those seeking
a TSP. This group of respondents
may be exposed to the most cur-
rent TSP offerings and find greater
comfort with the availability of highly
secure data store options. Regard-
less of the stage of implementation,

12
rienced vendor can reduce the
impact of this barrier on adoption.
Internal Expertise
Lack of internal telematics program
management experience is select-
ed by 13% of survey respondent,
representing all phases of imple-
mentation excepting those seeking
vendor support. Those in this phase
may be most focused on obtaining
external support for the new initia-
tive. For those companies with such
a barrier, seeking a partner that can
close the talent gap in the areas of
data analytics, strategy, marketing
and training will be paramount to
adopting best practices and avoid-
ing pitfalls. While those insurers
who had already implemented
telematics reported finding the
right talent as an internal barrier
slightly less than those with imple-
mented programs, there was very
little variation on this barrier based
on organization size, suggesting a
possible overall shortage of talent
with telematics experience.
Go-To-Market Strategy
The go-to-market strategy is seen
as a barrier primarily for respon-
dents of Tier 2 and Tier 3 compa-
nies, of which 50% have partial or
fully implemented programs in
place, giving great validity to this
barrier. These respondents have
experienced all of the challenges
associated with designing and im-
plementing the new program.
If your company is grappling with
its go-to-market strategy, see if you
have addressed these issues:
• Identifying your target market –
within your existing book and
prospectively in your market
• Develop the product positioning-
gather intel through customer
interviews and market research
• Identify a territory within a
UBI-friendly state to launch an
initial pilot
• Develop the sales collateral,
training and support for your
sales team
• Support your sales team with mar-
keting messages that address poli-
cyholder concerns and benefits.
When selecting your TSP, seek an
experienced partner that can assist
and advise in all of the above. You
should also feel confident that they
identify the right technology and
data analysis required to success-
fully maintain the product offering
you develop.
13
Benefits of Telematics to the Carrier
As a proponent of telematics in The key ingredient to a successful partments including claims, sales,
your organization, you may ask implementation and recognition of marketing, product development,
yourself, “how can I best articulate these benefits starts with organiza- underwriting and IT. Articulating the
the benefits of telematics in light of tional buy-in and the strong com- advancements telematics will bring
these barriers?” Figure 10 highlights mitment of key teams. A telematics to each department, with a commit-
the benefits realized by respon- program will impact several de- ment of support and guidance from
dent’s organizations through the
implementation of telematics.
Figure 10: Saw Improvement
Improved risk pricing capability
is the greatest benefit realized by
carriers, followed closely by greater
policyholder satisfaction, retention
and acquisition. The consistency
with which survey respondents
cited these improvements should
prove a boon to those struggling to
address aforementioned internal
and market barriers to implemen-
tation.

14
your chosen partner during peri-
ods of transition and adoption, will
foster successful team ownership of
telematics.
Risk Pricing
Improvement in risk pricing has
been experienced by 75% of the
respondents with telematics pro-
grams in place. As we examine
more closely the relationship be-
tween those companies experienc-
ing ‘significant’ improvement and
the level of departmental engage-
ment, we find a direct correlation
with ‘highest’ level of engagement
from product/underwriting, claims,
and the C-Suite. When these de-
partments work together around
the new model defined by real-time
driving data, they develop and
support more flexible and custom-
izable policies that align cohesively
with the overall product offering and
corporate strategy.
Customer Acquisition,
Retention and Engagement
UBI offerings have long been seen
as a means of acquisition and reten-
tion, an opportunity to strategically
target better risk drivers, and retain
those policyholders who might be
seeking savings elsewhere. Of those
experiencing significant improve-
ment in customer acquisition, 71%
described their program as having
the highest level of involvement,
while only 38% of those with low
involvement gained this benefit.
Similarly, sales and marketing ef-
forts correlated to higher customer
retention with 79% of respondents
experiencing a significant bene-
fit, while only 59% among those
without strong support of sales and
marketing. These insights support
the strategy of strong communica-
tion around the value proposition of
telematics. For these insurers, the
commitment to an inclusive mar-
keting/sales campaign to promote
the value added service offering
provided through telematics, such
as stolen vehicle recovery, vehicle
diagnostics, driving style feedback
and emergency response services,
removes the ‘commodity’ stigma
from the sale. With telematics,
carriers have the opportunity to add
‘peace of mind’ and ‘convenience’ to
the marketing message.
Lastly, implementing telematics
improved customer satisfaction
and engagement for 72% of re-
spondents. Those respondents who
highlighted this benefit also de-
15
scribed highest engagement from
departments responsible for prod-
uct/pricing/underwriting as these
departments develop the discount
programs using telematics. Further,
75% of those who implement-
ed value added service offerings
involving crash and claim capabil-
ities saw moderate to significant
improvement in customer satisfac-
tion, though few are at this stage.
Using telematics, innovative prod-
ucts can be developed to foster
greater loyalty and engagement
through not only premium dis-
counts, but also rewards, shared
data and notifications. The goal is
to shift the relationship from lim-
ited engagement, during a claims
process, to frequent interaction
around positive outcomes to which
they benefit daily. Through gam-
ification and driving challenges,
customers can earn rewards within
partner programs (gas stations,
convenience stores, coffee shops
etc.) creating an ecosystem to sup-
port safe driving that does not al-
ways required premium discounts.
By offering parents and business
owners the service of geo-fencing
and curfew notifications, carriers
can offer their policyholders peace
of mind and a sense of control,
while improving the driver safety
to those being monitored. En-
gaging policyholders with vehicle
health monitoring and preventive
maintenance notification offers yet
another opportunity to connect, in-
creasing the frequency with which
loyalty may be fostered.
The key to successful implementa-
tion is engagement from the stake-
holders across all departments that
are impacted by the innovation
telematics will ultimately bring to
product and service offerings as
well as internal operations. Trans-
lating those offerings into a con-
sistent message to the targeted
audience and supplying sales with
the training and collateral required
to successfully sell the new value
proposition is as critical. Paramount
in overcoming the barriers noted
and achieving the benefits cited,
whether just starting or advancing
your telematics path, is choosing a
partner that can lead and support
your implementation, and remain
one step ahead of this rapidly ad-
vancing technology.
Claims
The survey indicates that very few
telematics programs support crash
reconstruction and claims manage-
ment programs. While in its infan-
cy, the majority have experienced
improvements in claim processing.
Real-time analytics received during
a crash can reduce fraudulent
16
claims, accelerate and often elim-
inate investigative work, provide
data in support of disputed claims
– minimizing the defense costs,
and reduce adjudication time. With
the support of the right partner,
data gathering is transformed into
active intelligence to support claims
processing at a new level. Accident
data can be matched against stan-
dards to flag inconsistencies and
potential fraudulent claims before
an adjuster becomes involved.
Adjusters are better armed with
accident details when addressing
these claims and can be eliminated
from the process when a claim falls
within standards.
Even before a crash occurs,
telematics is supporting reduced
claim frequency. By more accu-
rately segmenting your prospective
customers, you are attracting lower
risk drivers who by nature are, and
with assistance of creative
programs, will become
even safer drivers.
“External data like this
report, case studies,
and analyst reports will
only get you so far in
proving the benefits of
a telematics program. At
some point insurers sim-
ply need to get started.
Octo has a market lead-
ing pilot program to help
insurance carriers realize
benefits in as little as one
week.”
Nino Tarantino
Chief Executive Officer
Octo North America
17
Future
The auto industry anticipates that by
2020, all new cars will be equipped
with pre-installed telematics devic-
es with driver opt in. The greatest
challenge for insurers will be to ac-
cept real-time data from numerous
pre-installed and after-market de-
vices until 2035, when all on-road
cars should be fully connected. Ad-
vancements in semi and complete-
ly autonomous driving technology
as well as share driving, will add a
layer of complexity in data analysis
yet to be determined. What we do
know is more real-time data will be
critical in assessing risk as we move
beyond the driver, to the vehicle.
An innovative TSP can act as the
‘hub’ collecting and analyzing all of
that data generated from a pleth-
ora of devices, having established
relationships with the OEMs and car
manufacturers.
In the future, direct partnerships
between TSPs and OEM’s will form
to capture and analyze data to be
monetized to the market, similar
to those cropping up in California
where insurers cannot directly
obtain all of the UBI data that other
states allow. Before that occurs, it
is imperative that insurers adopt
telematics in order to fully under-
stand the value of the data and ef-
fectively evaluate what type of data
is required to support a successful
telematics program.

1 https://www.towerswatson.com/en-US/Insights/Newsletters/Americas/americas-insights/2015/
millennials-enthusiasm-for-usage-based-insurance-will-require-a-complete-rethink
2 http://www.verisk.com/images/stories/documents/dloads/iso_review/ISOReview-Aug09.pdf

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w w w.oct ou sa .com