Does Immediate Feedback Make You Not Try as Hard? A Study on Automotive Telematics

37 Pages Posted: 28 Oct 2018 Last revised: 21 Jan 2020

See all articles by Vivek Choudhary

Vivek Choudhary

INSEAD - Technology and Operations Management

Masha Shunko

Foster School of Business, University of Washington

Serguei Netessine

The Wharton School, University of Pennsylvania

Date Written: January 20, 2020

Abstract

Problem definition: Mobile and Internet-of-things (IoT) devices increasingly enable tracking of user behavior, and they often provide real-time or immediate feedback to consumers in an effort to improve their conduct. Growing adoption of such technologies leads to an important question: “Does immediate feedback provided to users improve their behavior?” We study immediate (close to real-time) feedback in the context of automotive telematics, which has been recognized as the most disruptive technology in the automotive insurance industry.

Academic/Practical relevance: Numerous automotive telematics providers claim unsubstantiated benefits from immediate feedback, while we still barely understand the implications of such feedback on user behavior. Given that feedback’s effect sometimes is ambiguous, at the same time such feedback providing devices’ usage is increasing, it is important to study immediate feedback and identify the effect it has on human behavior, especially in important applications, such as automotive. This understanding is important given that other attempts to make driving safer have led to unintended consequences in the past.

Methodology: Using proprietary data on driving behavior, as measured by several parameters such as harsh braking, speeding, and steep acceleration, we investigate immediate feedback’s impact on driving behavior using econometric methods; with instrumental variable regression employed to estimate the effect.

Results: Contrary to much existing feedback literature and claims from multiple telematics providers, we find that on average, users’ driving performance after they receive detailed feedback is nearly 14.9% worse than that of users who do not review their detailed feedback. This impairment in performance translates to 6.9%, or a one-year reduction in inter-accident time. Our results suggest that this deterioration is associated with increased speeding. Strong negative feedback (e.g., a sharp deterioration in performance) exerts a positive effect on short-term performance. Furthermore, we demonstrate that drivers just below the insurance incentive thresholds exert greater effort following immediate feedback.

Managerial implications: Our results provide a key message to firms employing immediate feedback – specifically that such technology can yield unintended consequences. Furthermore, we show that drivers should receive only strong negative (but not positive) feedback to improve their performance. Finally, our results suggest that insurance incentives should be continuous, rather than a step function.

Keywords: Immediate Feedback; Empirical Operations Management; Behavioral Operations Management; Automotive Telematics

Suggested Citation

Choudhary, Vivek and Shunko, Masha and Netessine, Serguei, Does Immediate Feedback Make You Not Try as Hard? A Study on Automotive Telematics (January 20, 2020). INSEAD Working Paper No. 2020/05/TOM. Available at SSRN: https://ssrn.com/abstract=3260891 or http://dx.doi.org/10.2139/ssrn.3260891

Vivek Choudhary

INSEAD - Technology and Operations Management ( email )

Singapore, France

HOME PAGE: http://www.insead.edu

Masha Shunko

Foster School of Business, University of Washington ( email )

PACCAR Hall
Seattle, WA 47185
United States

Serguei Netessine (Contact Author)

The Wharton School, University of Pennsylvania ( email )

3730 Walnut Street
Philadelphia, PA 19104-6367
United States
(215) 573 3571 (Phone)

HOME PAGE: http://www.netessine.com

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