Geofencing: definition and its applications in the insurance sector

Seizing the opportunities in the insurance sector require right data from the right sources. Safety and security are gaining more significance than the benefits themselves. Personalized premiums are getting weightage, and to provide right plan to the right policyholder, providers need reliable and location-based data that can guide them to channel their efforts in the right direction.

One of the most suitable solutions for this need is “Geofencing”, a technology that helps in the collection of accurate, location-based data to provide utmost safety and reliability to the policyholder, and enhance the services provided by the insurer, creating a win-win situation for both.

What is Geofencing?

Geofencing is location-based technology using GPS, cellular data, or RFID. A technique that creates a virtual boundary around a real geographic area. The border can be adjusted to a specific size and shape like a circle or polygon and can be configured to trigger automated actions or alerts. Something moves in and out of the boundary.
Geofencing is used in a wide variety of applications such as Marketing, Security, logistics, etc. For example, retailers can use geofencing to send targeted promotions to those entering certain stores while security companies can use it to monitor and control access to secure facilities. Geofencing can be used by logistics companies to track vehicle locations and ensure that they stay within the designated area.

Geofencing in the Insurance sector
Geofencing is a powerful technology that is gaining popularity in the insurance sector. Insurance companies can collect and analyze data on policyholder driving habits and risks. This will enable them to offer more personalized and competitive insurance products. 

Applications of Geofencing in the Insurance sector

Personalized premiums
Geofencing can be used to monitor the driving behavior of policyholders in particular areas such as highly trafficked or high-risk zones. Using this data, insurers can offer personalized premiums that reflect the actual risk profile of the policyholders in these areas.
Proactive risk management

Geofencing can be used to identify high-risk accident-prone intersections and high-crime areas. Insurance companies can use this information to notify policyholders with advance guidance on how to mitigate risk in these areas.

Location-based Services 

Geofencing can be used to provide location-based delivery Policyholder services such as reminders for updating policies when they are near an insurance agency office or in an area with bad weather.

Anti-theft

Geofencing can be used for theft detection and prevention of Insured assets such as cars and appliances. policyholder assets Parking lots or construction sites, alarms can be triggered to notify policyholders and insurance companies when policyholders’ assets leave a designated area.
Usage-based insurance (UBI) is one of the main applications of geofencing in the insurance industry. An insurance policy known as UBI bases its premiums on the actual driving habits of the policyholder, including their speed, distance travelled, and braking techniques. This information can be gathered using geofencing technology, and the policyholder's risk level and premiums can be determined using the results.
Incentives and targeted promotions can be given to policyholders based on their location using geofencing. For instance, an insurer might give policyholders a discount if they drive in low-risk areas or stay away from certain dangerous roads or intersections.
Geofencing has other applications besides UBI and targeted advertising for claims management. Geofencing technology can be used to identify a policyholder's location after an accident and collect information about the accident's specifics, such as the time of day and the weather. This information can be used to speed up the claims procedure and increase the precision of claim evaluations.
Geofencing can also be used to promote safer driving practices, which will increase traffic safety. Using geofencing, insurers can track policyholders' driving patterns and provide feedback and coaching on how to develop better driving practices. Accidents and claims may be decreased as a result, to the mutual benefit of the insurer and the policyholder.

In conclusion, geofencing technology has the potential to completely transform the insurance industry by enabling insurers to provide more individualized and affordable insurance products, enhance claims processing, and promote safer driving habits. Insurance companies must, however, weigh the advantages of geofencing technology against privacy concerns to ensure that policyholder data is responsibly collected and used.

Adding the flavor of AI to Geofencing

Here is where Pega CDH's potent features come into play. By gridding through the data gathered via geofencing, Pega CDH's powerful AI engine improves decision-making. 

To increase its capabilities and advantages in the insurance industry, AI can be integrated with geofencing technology. Insurers can analyze vast amounts of data on policyholders' driving behaviors and risk profiles using AI-powered algorithms and predictive analytics to gain deeper insights and more precise predictions.

To evaluate risk and determine premiums, AI can be used to automatically spot patterns and trends in a driver's behavior, such as frequent hard braking or speeding. Insurers may be able to create more precise risk models and provide more specialized insurance products as a result.

AI can evaluate accident data and evaluate claims to automate claims management procedures. As a result, processing claims will take less time and money, and claim assessments will be more accurate.

Furthermore, by examining data on accidents, traffic patterns, and weather, AI can be used to create predictive models for improved road safety. This can assist insurance companies in identifying high-risk areas and help them proactively advise policyholders on safer driving practices and alternative routes.

It is important to note that the combination of geofencing technology and AI raises ethical and legal questions. The use of AI and geofencing by insurers must adhere to ethical standards and data privacy laws. For policyholders to understand how decisions are being made and have confidence in the technology, they should also make sure that AI-powered algorithms are transparent and understandable.

In conclusion, the combination of AI and geofencing technology has the potential to have a significant positive impact on the insurance industry by allowing insurers to develop predictive models for traffic safety, gain a deeper understanding of policyholders' driving patterns and risk profiles, and automate claims processing. However, insurers must use AI and geofencing technology responsibly while keeping moral and legal considerations in mind.

Enhancing the applications of Geofencing in the insurance sector with AI

Fraud detection 

By tracking policyholders' locations when they report an incident, geofencing technology can be used to find fraudulent claims. For instance, it may be a sign of fraud if a policyholder report being in a car accident in a specific location but smartphone data reveals they were somewhere else at the time. The data can be analyzed using AI to spot fraud patterns.

Telematics

The use of technology to track and transmit data on vehicle usages, such as speed, acceleration, and braking, is known as telematics. To automatically adjust policyholders' premiums based on their behavior in particular areas, such as school zones or construction sites, geofencing technology can be used to create virtual perimeters around those places. AI can be used to analyze the data and spot behavioral trends that point to higher risk.

Emergency response

When a policyholder is involved in an accident, geofencing technology can be used to automatically alert emergency services and provide their location and other pertinent information. AI can be used to analyze the data and give emergency responders on-the-spot instructions.

Risk evaluation

Using geofencing technology, policyholders' driving patterns can be tracked over time to determine their overall risk profile. AI can be used to analyze the data and offer suggestions for how policyholders can lower their risk, like avoiding specific roads or driving during specific hours of the day.

Conclusion
Geofencing is undoubtedly intrusive, but it greatly strengthens the safety net around daily activities. By using geofencing, a business can make data-driven decisions while balancing privacy concerns and value delivery. Pega's AI-powered CDH implementation coupled with data-capturing tools enables quick and accurate decision-making. 

Blog written by: 

Mayank Tripathi 
AVP Engineering and Solutions