Cutting the UBI cloth to suit consumers

Finding the keys motivators for individual customers will be the biggest challenge for insurers seeking to spread UBI policies further through the market.

That’s the assessment of Steve Hales, group head of connected insurance, Generali. Speaking to TU-Automotive, Hales said that while pricing will still have an important role to play, insurers must look for broader offerings to attract low risk consumers.

He said: “The temptation is always to start with price, which doesn’t work particularly well when you have low average premiums. This is especially true in the comparator market where you are unlikely to be able to beat someone else’s discounted premium. Also, a UBI insurer will be selling a more complex product and would need to use a more complex sales process and these two factors combined make the prospect very difficult.

“So it comes down to understanding those customers well and considering what type of services we can offer that are meaningful to them. There are interesting things happening right now with the pace of the spread of connected car technology on the road – the turnover in Europeper fleet is around 7%-8% per year, which means that any one time you have 15 years worth of technology driving around on the road.

“As insurers, if we remain technology agnostic, we can offer something to all kinds of drivers, with in reason, irrelevant to the age of their car. This spread of potential market gives us an advantage and, again, for me it comes down to the technology and understanding the psychology and the emotion attached to it. If we can create a something that’s compelling to our customers then we will succeed.”

Hales said it’s increasingly important to see the telematics market in a more individualistic way tailoring products for identifiable segments. He said: “For some people it could just be the emergency services back-up and knowing that with a press of a button or, as with some of our new products, automatically we contact the customer if, say, there is a sudden deceleration. While for other customers there may have to be something more tangible incentives for them to engage in the product. There may also be some customers who will actively decide they do not wan to engage – these may be perfectly attractive customers for us but prefer to keep things simple and who see insurance purely as a commodity.

“So we have to look at all these different segments and what I think we will see in future is a broader spectrum of product offerings coming to market. The tangible nature of these products will be where different insurers can offer things, whether services or some sort of loyalty scheme.

“The point is we will all be able to talk to our customers in a more interactive way with this technology. Historically, if you think about how we normally manage products, having more products creates complexity and cost. Yet, with modern technology, you can have a standardised approach to processes and within that you can tailor your products and services to different customer segments.”

However, in the mid-term, policy pricing could well have an impact because Hales expects premiums to rise in the coming years to keep pace with repair costs. He points to the issue with electric vehicles, which while not greater accident risk in themselves, attract large premiums because of the technologies employed.

Hales explained: “This area could benefit from telematics because, irrelevant if you are driving a brand new Tesla or a ten-year-old Ford Fiesta, you are the driver and whatever happens in that car is down to you.

“The thing we have to be aware of with new technology such as electric cars, the cost of the components is incredibly high and, strangely enough, in the next few years we may well see an increase in premiums and total GDPfor two reasons. First, the cost of replacing a bumper now could be the price of a small car in some premium vehicles. Secondly, distracted driving is a major issue and we all see it around us with people using phones while driving. These two things will probably drive up insurance premiums.

“ADAS is a good example where we see claim frequency falling with people not reversing back into a gate post quite so much but, when there is an accident, the cost of repairs is much, much higher. Also one is not off-setting the other – cost of repairs are increasing much more than the decline in accidents.”

That said, Hales admitted these years of high premium rates are unlikely to continue beyond the widespread adoption of driverless vehicles, saying: “Ultimately, we will see a decline as cars become more autonomous and where the customer behaviour does not become a key element.”

[Ins.Myles.2017.06.23]