Allstate: "Ushering in a new era of auto insurance"

TU: Can you provide a quick introduction to your role at Allstate?

NB: I am the usage based insurance general manager here at Allstate. I oversee the general day-to-day operations for DriveWise as well as work on the development of future state enhancements. I have been doing this role for about four years. My background is technology and process performance for business, as well as marketing design. So I’ve merged those two skill sets into my optimal job.

TU: UBI solutions have steadily gained traction over the past five to 10 years. Some describe the current market among top insurance carriers in the U.S. as an arms race. Do you agree?

NB: I would agree that UBI solutions have steadily gained traction over the past five to 10 years; however, I’m not sure I would agree with it being called an arms race. It’s a little bit strong. There is a lot of healthy competition between the insurance carriers. I merely think we have a convergence, a perfect storm if you will. The technology has improved to the point that it’s small, nimble enough, the price point is good, so that capturing actual driving behavior is now feasible.

TU: Even if it’s just a convergence of activity, what would you say is at stake here? And what should companies focus on achieving through UBI products?

NB: Understanding your customer is key. If you understand your customer and know what they want, then you want to be able to provide as an insurance company the best services at the best prices for your customer. Here within our UBI practice, that’s what we are doing: We’re focusing on providing a product to attract and retain the safest drivers. We know that drivers that want to be safe want to be rewarded for that driving, and our UBI product gives them a means for proving that they’re safe and thus being rewarded. So it’s pretty simple.

TU: To formulate sound strategy, you generally need good metrics. What metrics should insurers be focusing on when it comes to telematics?

NB: There are a lot of myths here, but there really is no secret to base metrics that are part of the UBI model. The first is mileage. Mileage is intuitively going to be your most heavily weighted metric because the more you’re on the road, the more chances you have of getting into an accident.

The other things subsequent to that are things like breaking, the time of day that you’re on the road, high-speed driving. Those are all very intuitive factors that play into a UBI model. Take breaking, for example. If you’re breaking hard and you’re breaking hard a lot, that is usually an indicator that you’re not paying attention, you’re tailgating, or you’re not leaving enough time or space between you and other vehicles and infrastructure on the road. A lot of people don’t like the fact that breaking is part of it, but it is an indicator that if you break more than someone who doesn’t, you’re going to be higher risk. It’s just straight math there.

Things like time of day are also intuitive. Late at night when it’s dark out, people are either tired or they’re drinking or other things they probably shouldn’t be doing, so it’s a higher risk time. And high speed, that’s one of those things that people don’t necessarily like either, but it’s intuitive to know that higher speed means that you have lower reaction time to incidents or potential accidents.

TU: A recurring challenge or concern with UBI products is that high-premium drivers will leave their policies through new revenue opportunities. How can companies counter this effect?

NB: I really think that it is standard business 101. Make sure that you offer your customers the best services at the best prices that you can. If you’re doing that in a way that resonates with your customers, they’ll stay regardless of what other people are offering.

TU: Let’s talk about your specific activity at Allstate. How have you taken some of the lessons you just shared and incorporated them into your own offerings?

NB: The number one lesson that we have learned over the few years we’ve been doing this is that education is key. UBI is not necessarily a new concept, but it is fairly new compared to other insurance products. Insurance in general has been around for as long as there have been things that you want to protect, there’s been insurance there to offer protection for it.

But UBI is a little bit different in that we’re giving somebody a price for their auto insurance based on how they actually drive, so there’s some education in terms of what safe driving is, what safe drive isn’t, and what risky driving is. So it’s a matter of getting the general consumer up to speed on what that really means. Once people understand that it’s based on actual science, they get it. They may not agree with it, but they understand that it intuitively makes sense.

TU: Beyond the basic services, have you started to integrate new features into your UBI offerings, like dynamic content and external services? Is this an important way to create competitive advantage?

NB: I think that is a logical next step that we would like to make, though it remains to be seen whether or not that is a step that will happen. Here at Allstate we’re still exploring whether services in addition to the base UBI offering is something that we want to pursue.

TU: Looking ahead, what are you most excited about when it comes to your own UBI solutions and to the broader UBI market? Is telematics ushering in a new era of auto insurance?

NB: I think what’s exciting to me is when people get it. When customers get the connection between their actual driving and the price they’re paying, and they can actually make some changes and determine the price they pay, you get to see the light bulbs go off so to speak and then people understand that, you know what, if I understand what safe driving is and actually execute on what that is and get to save money, it actually makes sense. So you wrap all those things up, then yeah, we are ushering in a new era of auto insurance.

For more from Nate Bryer, see Telematics, UBI, and driver education.

Click here to hear a podcast with Nate Bryer.

For more on insurance telematics, see Special report: Insurance telematics.

For all the latest trends in insurance telematics, check out Insurance Telematics USA 2012 on September 5-6 in Chicago and Telematics Munich 2012 on October 29-30.

For exclusive insurance telematics business analysis and insight, read TU’s Smart Vehicle Technology: The Future of Insurance Telematics report.


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