Can Telematics Improve Driving Style? The Use of Behavioural Data in Motor Insurance

The use of behavioural data in insurance is loaded with promises and unresolved issues. This paper explores the related opportunities and challenges analysing the use of telematics data in third-party liability motor insurance. Behavioural data are used not only to refine the risk profile of policyholders, but also to implement innovative coaching strategies, feeding back to the drivers the aggregated information obtained from the data. The purpose is to encourage an improvement in their driving style. Our research explores the effectiveness of coaching on the basis of an empirical investigation of the dataset of a company selling telematics motor insurance policies. The results of our quantitative analysis show that this effectiveness crucially depends on the propensity of policyholders to engage with the telematics app. We observe engagement as an additional kind of behaviour, producing second-order behavioural data that can also be recorded and strategically used by insurance companies. The conclusions discuss potential advantages and risks connected with this extended interpretation of behavioural data.