Global Protection for Consumer Data Will Sell UBI

Graham Jarvis explores how connected services can attract customers to the benefits of UBI.

At conferences usage-based insurance (UBI) providers talk about it as the future of insurance, encouraging better driver behavior while rewarding them for being better drivers. Yet, it’s the safety message of UBI has one potential barrier – being tracked and measured for our driving performance seems akin to Big Brother sitting on our shoulders, and that’s enough to put off many consumers.

It’s one thing to have smartphone that can track us, whenever location-based services are switched on, and it’s another matter if what we do is being measured. However, most mobile connected services are being tracked anyway, without most of us either knowing about it or being generally ignorant of the fact. UBI highlights the ability to track, monitor, analyze and measure what we do and where we do everything we do. There will, therefore, always be certain age groups, concerned about the personal privacy, who will be resistant to UBI adoption – even if they currently use a smartphone.

Most successful segment

Roger Lanctot, director of automotive connected mobility at Strategy Analytics, comments: “The most successful segment for UBI insurance remains young drivers.  Carmakers are exploring the creation of insurance marketplaces within their existing connected car platforms but these models are still evolving and the challenges of data management and privacy have emerged as additional barriers to deployment even as the pricing and scoring are still being sorted.”

“Usage-based insurance began to gain traction as consumers realized they could possibly save money on their car insurance based on their individual driving behavior”, says Nino Tarantino, CEO of telematics and data analytics Octo North America. He believes this is because additional benefits beyond policy discounts have been highlighted. He adds: “UBI programs powered by telematics offer many more value-added benefits to policyholders such as crash and claims management, vehicle health, and location-based services. These features help consumers to be safer in many ways: better driving, safer cars, navigating safer roads and getting help immediately, and back on the road faster, in the event of a crash. As the value of UBI programs to consumers has increased, consumers have come to realize that UBI programs are inherently more fair and transparent ways to price insurance – and adoption has increased in response.”

Reduced costs and accidents

Graham Gordon, director of global telematics at LexisNexis Risk Solutions, says UBI has helped to reduce the cost of insurance policies by 11.9% and it has reduced the cost of acquiring the data by 50%. These figures emerge from a 2018 Consumer Intelligence report, Car Insurance Premiums Go Into Reverse. He also cites research from the UK’s Driver and Vehicle Licensing Agency, which suggests that UBI is playing a role in cutting road accidents among the youngest driver – namely the most vulnerable group, the inexperienced and risk averse 17-24-year olds.

However, he warns that the market is close to saturation: “There are now over 70 retail brands targeting the new and young driver market. If the growth of telematics policies continues at a steady rate, then this market is capped at around one million drivers.”

“That is because only a third of 17-19-year-olds hold a UK driving license, which is broadly a million drivers and not all drive a vehicle. This number is a drop in the ocean when one considers the 39m driving license holders across the UK.  For the market to continue to grow, opportunities outside the young driver market must be considered.”

Understand attitudes

LexisNexis has therefore conducted a “detailed survey of over 3,000 motorists to understand their attitudes, opinions and preferences regarding telematics insurance. We ensured that our samples matched UK demographics on age, gender and ONS social class”. The findings discovered “that whilst there is some level of resistance and certain barriers in some segments of the driving population, today there is an untapped growth market of 9.8 million drivers.” So, from this research, he says there is a much bigger market opportunity to “develop propositions that will have wider appeal for different market segments.”

Go beyond price

Insurers needn’t just compete on price alone with UBI. They can become even more competitive by offering insurance or insurance-related products and connected services to capture the mass market. “It’s important to remember, UBI will become commonplace with the connected car so the telematics offerings today are helping to future proof the insurance market, whilst enabling consumers to prepare for connected vehicles and benefit from their driving data in a really tangible way,” he remarks. Yet resistance to UBI may remain unless it becomes mandatory in all vehicles.

Offer connected services

John S. Franklin, a spokesperson for insurance company Aviva, says connected services cover a wide range of products and propositions – from driver assistance and driver wellbeing to vehicle maintenance and breakdown prevention. Maps, in-car wi-fi and infotainment are other examples of connected services.

He adds: “As mentioned above UBI is a useful tool in the assessment of drivers driving and their likelihood of being involved in a collision. UBI does not solve this, it merely helps insurers predict which drivers are more likely to cause a collision. UBI could ultimately be part of a much wider benefit for customers in that driverless or autonomous cars could be the future of motoring. This would remove human intervention on a large scale and transform motoring from the activity it is today.”

Become relevant

Lanctot finds that insurance companies want to become more relevant but they don’t want to add massive amounts of cost to their model.  “Progressive Insurance in the US is the quintessential low-cost business model but this model allows for very little value-added role for the insurance company,” he explains.  However, he says consumers like this “more-or-less minimalist approach”. Nevertheless, he thinks that this approach may not serve the insurance industry or the consumer very well.  “Obtaining vehicle data from a built-in or aftermarket device opens the door to a richer customer engagement including driving tips, potential marketing, discount offers, and maybe even vehicle diagnostic or service advice” may,, therefore be the way forward in his opinion.

He said: “Insurance companies want to sell more insurance products and consumers are connecting their cars, homes and mobile devices. There are multiple opportunities to sell other kinds of insurance to the car insurance customer with the right or proper “engagement” strategy.  The challenge and opportunity is to identify and leverage value-added opportunities based on the UBI connection.” For the moment though, he thinks that “UBI remains connected car insurance ought to be a transformative value proposition but the transformation will likely come in 3-5 years”.

Gordon concludes that the success of UBI much depends on consumer education, the ability of insurers to understand “how the proposition appeals on different levels to men and women, and how this changes at different life-stages”. To reach the mass market, consumers will also need to be reassured about how their data is going to be used and the industry will need to adopt a global telematics approach to allow for scalable UBI offerings to cater for the market as it grows.

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