By David O'Bryan, Standard Lines Account Executive, State Auto Insurance. Originally published on LinkedIn.
Here are 5 tips for independent agents on selling telematics:
1. Get on board now. With rates going up due to increased losses from distracted driving, insurers are looking for ways to use driver data and sensor technology to more adequately and accurately "rate to the risk." However, all the average consumer knows is that their auto insurance bill keeps going up, and up, and up. And since close to three-fourths of customers have their auto insurance with just 10 carriers, a lot of people will be looking around for better deals and lower rates over the next few years. For many of these customers, it will be the first time they've shopped outside of their longtime (likely captive/direct) agent and will be their first experience getting a quote from an independent agency. These will be people not only looking for a new relationship but new products, especially products tailored specifically to them and their families, which is exactly what a telematics auto insurance program provides.The reason the time has to be now is straightforward: this technology and customer experience, still relatively new today, will completely dominate the industry in a few years, and agents who jump on early will reap massive rewards. The key with telematics is the customer has much more control over their auto insurance premium, unlike what they face today with their rate determined by a confusing hodgepodge of things like their credit score, age, gender and zip code. And most frustratingly of all, what they pay is oftentimes heavily influenced by what other people do behind the wheel. Customers will be intrigued by the fairness of a telematics program, but agents will still need to provide the details and create an experience. Along those lines...
2) Don't oversell the potential savings. Most current telematics policies feature an up-front discount with the potential to earn a steeper discount for exhibiting safe driving habits. (State Auto's program, for example, has a 10% initial discount with a maximum 50% reduction for the best drivers.) The problem with "selling to the discount" though is it sets the customer expectation only for savings (potential gain) and doesn't reinforce enough the new customer experience that a telematics policy provides. The goal of a telematics policy is to encourage better driving behavior - the discounts and savings are just the incentives for drivers to be more conscientious and less distracted behind the wheel. And while on the subject of price...
3) Do sell to the potential loss vs the potential gain. When it comes time to talk price on a telematics policy, after you've highlighted all the other benefits and showcased the new customer experience your agency will be providing, emphasize what customers stand to lose over what they could possibly gain. It's a well-established principle of persuasion that human beings are more motivated by potential loss than potential gain. Here are two examples of selling a telematics policy to a new customer:
A) If you're a good driver going with our telematics program will likely save you between 10 and 50% on your auto insurance.
B) If you're a good driver, not going with our telematics program will likely result in you paying 10 to 50% more on your auto insurance than you should be paying.
Go with option B every time. You'll close more telematics sales and get more telematics referrals. On to tip #4...
4) Pass on the trial-period telematics programs. A few big-name insurance carriers offer what I call a telematics-lite program. The customer drives with the telematics device for a 60 or 90-day period, then ships the device back to the insurance carrier. Agents should beware of this method. Remember: the number one goal of a telematics program should be to encourage drivers to develop better and safer long-term driving habits, to put down the cell phones and be more conscientious behind the wheel. Distracted driving is why auto insurance rates are exploding, and the plain fact is this: anyone can drive well for 60 or 90 days. A true telematics program is a completely new experience for the consumer, and the best way to bring about lasting change in this rapidly changing industry is to have a telematics device providing constant feedback to the driver: full-time, year-round.
The trial period telematics programs only benefit the insurance carrier - they get a ton of data (subsidized by a giveaway discount to the customer) which they use to better target their ideal customers. There's very little care or consideration for the consumer, the independent agency, or the industry as a whole. Worst of all for you the agent, trial-period telematics does nothing to create a new experience for the customer, an experience that drastically increases the role and value of the agent. With a full-time telematics program, agents will ideally be touching the customer 3-4 additional times a year (as the agent works with the customer to maximize the benefits of the telematics program) which will lead to stickier, deeper relationships, higher retention and more advocates and referral engines for the agency.
5) Embrace the surcharge. In the same ballpark as tip number four, some carriers with a telematics option are selling it to agents with the promise of no surcharge, meaning drivers don't see their rate increase even if their driving habits are poor or unsafe. Early telematics programs led with this feature, which kept adoption rates low as the option was seen by many agents as an easy sale to bad drivers shopping for lower rates. Now though, with auto rates exploding due to distracted driving, and the data from telematics devices so much more accurate in determining the good drivers from the bad, the emphasis for agents should be to put their best drivers on a telematics program (I really can't stress that enough), and target telematics advertising and marketing campaigns at their competitors' best drivers.
Telematics carriers who aren't penalizing poor drivers are hunting for easy wins while doing very little about the underlying issue of distracted driving. Worst of all, by not surcharging for poor driving they're essentially continuing the trend we're seeing now across the entire industry, with good drivers having their premiums go through the roof to pay for the increased loss costs of a chunk of bad drivers. A truly impactful telematics program - one that's mutually beneficial to both the carrier and the independent agency - will fundamentally flip the dynamic for customers: good drivers will pay less, bad drivers will pay more. It doesn't get much fairer than that. And that's simply not possible if a telematics program isn't surcharging for bad driving. Avoid these programs.
In summary, independent agents stand to gain as telematics becomes a viable, intriguing, and cost-reducing choice for many customers. Independent agents, by being familiar with the technology and how to sell it, as well as the differences in the programs their carriers provide, can win traditionally captive/direct customers and turn them into advocates for the independent agency distribution channel, while also helping their local communities by creating safer drivers.
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