Catching pre-customer data could be key to UBI success

Although usage-based insurance products are steadily growing in popularity, uptake is still largely restricted to the novice driver market.  So, what strategies might the industry adopt to spread usage-based vehicle insurance into the older generation consumer market?

Although most insurers still use traditional rating factors in addition to driving behaviour, they are gradually finding that UBI data on a wide range variables related to vehicle operation, including driving scores, safety scores, aggressiveness, anticipation and smoothness, are much more predictive than any of the proxy variables that have long been used to price automotive insurance.

“Insurers around the world have been distributing telematics devices for self-installation by policyholders, or asking the customer to download a smartphone app which automatically tracks the vehicle movement,” says Robin Harbage, director at Willis Towers Watson.

“Information such as mileage, time of day, road type and driving patterns are utilised to rate the safety of the driving behaviour and customarily offer discounts to safe drivers.  Significant numbers of policies in Italy, the US, UK and South Africa have been sold as UBI policies,” he adds.

Encouraging older consumers

The use of UBI tends to vary from country to country.  For example, in the UK, it UBI involves young driver programmes, whereas in other markets such as the US and Canada, UBI is often aimed at mainstream drivers.  However, one target group that insurers in the UK and elsewhere have not yet tended to consider are older drivers.  This is at least partly because mature drivers display very different attitudes, behaviours and needs than younger drivers, so UBI providers have to build programmes specifically designed around their requirements.

“This group of drivers tends to display very different driving behaviour than other drivers because of their life-stage.  For example, they do not tend to drive to work as most are retired, so there is less driving during peak times or rush hours,” says Blair Currie, vice-president business development at Intelligent Mechatronic Systems (IMS). The firm, in an effort to tap into this market, has developed a product called IMS Mature Drivers Intelligence, specifically aimed at older drivers, as well as what Currie describes as their ‘guardians’.

“They also drive shorter distances and at different day-parts when compared to young and mainstream drivers, because vision and depth perception generally decline over time.  The result of this is that insurers need different forms of analytics to rate these drivers,” he adds.

Elsewhere, Randy Carroll, former CEO at the Insurance Brokers Association Ontario (IBAO), suggests that one potential way to manage the transition away from the novice driver to the mature consumer could be to introduce UBI in the senior market on a pay-per-usage basis “by allowing a base rate and adding in a utility approach to pricing based on distance driven”.  In his view, uptake of UBI by older drivers is really tied to what the offering and benefits are and how it is being presented.

“The older market may be cautious about having their driving patterns accessed and rated versus a pure usage based play.  Taking the approach of offering a product that is tied to distance driven or usage is easy to understand and, from there, the option could be given to those interested after their comfort level increases to move into a full UBI offering,” he says.

“The insurer would be better positioned to determine what drivers in the usage based programme would be good candidates for a discounted offering like a full UBI programme,” he adds.

Targeting good drivers

Looking ahead, Harbage thinks that having the ability to identify safe drivers in advance of selling a UBI policy and offering a highly competitive rate to these consumers with their permission to use the data, means insurers will be able to “target good drivers of all ages without the expense and hassle for the insurer and consumer of installing specialised equipment for telematics data collection”.

“The biggest issue for insurers has been getting insurers to voluntarily install a device or download an app to track their driving.  For some insured’s it is too much of a hassle or they hesitate owing to the concerns over privacy,” he says.

“Insurers also can’t identify the safest drivers until they become UBI policyholders, so the point of sale offer isn’t targeted.  If insurers could access driving information on consumers before they purchase a policy, and make targeted offers of discounted policies, the adoption rate and increase in sales would likely be very strong,” he adds.