Evolution is on the side of UBI

Spreading the uptake of UBI to the wider market will depend more on an evolutionary process for insurers rather than finding that ‘killer app’.

That’s the opinion of Dan Freedman, head of motor development at DirectLine Group UK who believes a market-wide adoption of UBI features is a distinct possibility.

Speaking to TU-Automotive, Freedman said: “The key barrier is how do you convince the large numbers of consumers, not 5% not 10% but 30% that you have a digital IoT product that they must have? We are on that journey and I think we will get there. We have launched two to three telematics based products in the last year-and-a-half and that’s the usual rate. Are we going to be able to launch the ‘killer app’? I’d love us to get there but it will be an evolution rather than a revolution.”

Yet DirectLine remain convinced that UBI has a major role to play in automotive insurance. He explained:  “We re-entered the telematics market about three years ago and now have more than 80,000 policies built on telematics and this is growing. Among the younger drivers of under 25-years-old we have 30%+ taking up telematics versus non-telematics dependent on the channel, so it is working. However, we still see it sitting within a niche market and we have appetite to see how we can break out of the young driver market.

“In terms of challenges why it has not happened yet, there are probably three areas that I would draw out. The first is around cost of the technology, the device, its fitment and servicing costs. The second area is about how much value do you generate? At the lower premium, lower risk end of the market the value of telematics as an underwriting tool starts to diminish because there is less risk to pare back. Finally, there’s customer value propositions – how do you convince somebody that it’s a good idea to share their data, journey data and personal data, with an insurer? What propositions, what value exchanges can you create that are meaningful and value added to customers?”

Changing digital scene

Freedman said it is important for any insurer not to rule out any of the ways to bring UBI to the customer because each solution has its own real merits.

He said: “We are now trying to focus on all three of these areas. On the cost side we are looking at device innovation and, in particular, we are looking at app only telematics. This went away a few years ago because everyone got worried about battery life and also the quality of data when customers can turn their phones off. But we’re back looking at apps and seeing whether we can get competent at app only solutions as telematics UBI tools and we’re doing this in anger.

“We are also looking at other ways of bridging the gap between professionally embedded devices and the smartphone and other hybrid options out there as low cost device solutions. Lastly we’re looking at connected cars and asking ‘Can we generate commercial relationships with manufacturers that allows us to access the data that’s already generated in those cars?’”

Freedman said an insurer’s relationship with its customers can also be prone to a radical change through the use of telematics.

He explained: “On the value side we’re looking at going beyond the selection benefits of telematics, particularly with our work on feedback. So if we can speak to our customers and give them feedback on their driving, what can we do to improve their driving score and the risk they represent to themselves and the organisation. Obviously there’s a much broader agenda there with the social agenda and stopping accidents happening. We have the data and the power to do that and we are looking at novel ways of playing a role with our customers more broadly in the area.”

Extending services

DirectLine is using its group relationship with the UK’s third largest vehicle rescue provider, Green Flag, top offer a proposition to attract more mature and safer drivers to its UBI services via its Alert Me smartphone app.

He said: “It’s those sort of services that sit within adjacent markets of core insurance, whether it’s roadside or motoring or mobility services, where the technology platform allows us to explore new diversifications, new markets, new service areas which we would otherwise not have considered looking at in the past. We’re on that journey.”

Freedman said different telematics solutions will suit different consumer sectors of the market and insurers must embrace all the possible on-board and mobile device platforms and hybrid forms using both technologies in tandem.

He said: “We’d like to see hybrid work as long as we can get ourselves confident that the quality of the data that we are getting out of the car is good enough and works then smartphones are bound to play a role. There will always be a place for professional installed devices for very high risk young drivers, then a middle ground of young drivers with experience would use a hybrid system and then when you move up into the low risk market it would probably be app only.”

But consumer trust must be the prime concern for any UBI provider so that users can have confidence that their data is safe, stressed Freedman.

He said: “We have to be selective over what customer data collect and why. One of the challenges we have is value exchange where we have to give customers a good reason to share their data with us and we have to be crystal clear about why we are collecting it. And any wider commercial opportunities have to remain within the customer’s control with a clear buy-in or opt-in feature. We are an industry under a great deal of scrutiny around treating customers fairly and we have a higher threshold in this area than suppliers in some other markets.”

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