IMS Comment on Possibilities and Pitfalls in UBI

TU: In which direction do you see the auto insurance industry heading? And how will personalization change the auto insurance business?

CURRIE: We believe that auto insurance is on the verge of significant change.  It’s a well-established and conventional business with recognized performance models, experienced players, and a layered distribution system. One key change involves telematics, which IMS is helping drive ahead.

But, change will likely come from additional players entering the auto insurance ecosystem, primarily major consumer tech companies, in addition to distribution-focused players such as automotive OEMs, dealers, warranty companies and more.

In short, auto insurance is ripe for innovation, and IMS plans to help our insurance carriers benefit from our technology platform.

TU: How widespread is adoption of UBI in your markets? And how quickly do you see it growing?

CURRIE: IMS is a global player so we see adoption rates varying in different markets where we do business. In markets such as the UK and United States, insurance telematics is optional and growing at different rates. The UK is relatively less regulated and is growing quickly in many forms including professionally installed devices, OBD-II fitted devices and mobile solutions.

Our largest market at the moment is the United States where the market is tipping; there, UBI appears to be reaching a tipping point in 2015.  This market is about 2-3 years ahead of Canada, which is only really just starting out.

TU: What’s the biggest hurdle to further adoption?

CURRIE: There are a series of hurdles to adoption and they vary from company to company. In general, the barriers include: consumer acceptance, what to do with the data, price and competing corporate priorities (such as the deployment of new policy, billing and claims management systems).

The good news is that these barriers are starting to decline as telematics technology prices drop and technology improves. Consumers are becoming more aware, thanks to market education through Canadian and US advertising of insurance telematics offerings. Finally, actuaries are learning to see additional value through better use of the data for other purposes in the organization, including: claims management, fraud detection, and life and property insurance.

TU: Privacy is a hurdle to UBI adoption in Canada, much like in the US. What is IMS doing to allay data collection and other concerns among drivers?

CURRIE: Privacy can be considered a barrier to adoption, especially among older drivers who are somewhat less accustomed to sharing information in exchange for a tangible benefit – including a lower price for insurance.  Younger drivers tend to be less concerned with sharing their data as they’ve grown up with social media where they use an implicit exchange of the service in exchange for sharing data. Moreover, younger drivers generally pay more for insurance so the impact of a discount on their insurance rate is higher.

That said, IMS believes that privacy is a fundamental right. We believe in protecting that data and ensuring that it is used in full compliance with user expectations and consent. IMS works closely with its insurance partners around the world to ensure that consent and permission are provided in order to use driving and vehicle data collected via telematics only for the purposes agreed to. This is done in full compliance with the rules and regulations governing privacy across the various jurisdictions where we provide telematics.

Consumers can benefit from telematics data as it provides the basis for pricing insurance and discounts, sharing driving scores to track progress, keeping drivers safe while behind the wheel (by providing tips and coaching) and providing valuable services such as roadside assistance in the event of vehicle breakdowns or accidents. Most importantly, it is ultimately the consumer’s choice and option to join a telematics program to share their data to receive these benefits.

TU: How does IMS use gamification to educate consumers about UBI; and what’s the most successful means so far to converting drivers to UBI?

CURRIE: IMS uses gamification to help influence driving behavior by having drivers keep track of their driving scores and, in some cases, share these with family members and/or a peer group. Education about insurance telematics and UBI is another issue, and that is done differently by different insurers. Direct insurers use advertising. Agent based insurers use agents as the primary communication channel.  In short, the type of communications and education really depends on the type of distribution channels an insurer supports.

When it comes to converting drivers to UBI, IMS offers a customer acquisition/trial option for Android- and iOS-based phones. This option allows insurers to try-out the product with policyholders to help with adoption.

We also find that a compelling proposition such as our IMS Young Drivers Intelligence solution encourages adoption, because parents get insight into young driver behavior, such as: rapid acceleration, speeding, harsh braking, sharp turns, excessive idling, length of journeys and time of day travelled.

Our IMS Young Drivers Intelligence technology has been successful because it helps parents keep their new drivers safer behind the wheel, while saving on insurance costs and coaching their child on safer driver habits.

TU: Tell us more about the IMS Connected Car Experience—whose idea was it, what makes it so special and while it’s gotten acclaim from The Weather Channel, Discovery Channel and others, is it winning business for the company?

CURRIE: Since our inception in 1999, IMS has considered itself a connected car company.  From here, we evolved our successful business by serving the auto insurance business vertical.

The connected car concept was developed by our founder and CEO, Dr. Otman Basir, following a car accident within his own family. In response to the accident Dr. Basir wanted to make cars safer, smarter and greener; and he set the company on a mission of developing the connected car.

While we have always worked with cars at both the Automotive OEM and aftermarket levels, we have tended to show the universal appeal of our product by featuring our telematics, infotainment and data technology within a range of vehicles including the Automotive Parts Manufacturers’ Association (APMA) Connected Vehicle, which was based off of a Lexus RX350.

We worked with our innovation, product management and marketing teams to showcase the IMS Connected Car Experience – featured inside a beautiful-looking Fiat 500 – in advance of Insurance Telematics USA held in Chicago in September 2014. The IMS Connected Car Experience has been a great success and was fully booked for the entire two days of the Chicago trade show.  We also brought it to a recent presentation where members of the selection committee went for a ride in the connected car to view how our technology works.

The objective of the IMS Connected Car Experience is to showcase the connected car services that our DriveSync platform provides. It’s one thing to talk about it in a PowerPoint presentation – it’s another to show a live demonstration within a working vehicle demonstrating our platform’s versatility in real-time. Our Fiat 500 enables us to feature in-market experiences as well as future technology prototypes. One of our recent media interviews with the IMS Connected Car Experience was featured on the Weather Network.

TU: Are you considering how more advanced self-driving and “connected” cars will change policies? What is IMS doing to prepare for these eventualities?

CURRIE: As automobiles incorporate more technology, include new safety features and take on more of the “responsibilities” associated with driving, they take on more risk. If the technology fails, who is liable for the result – the vehicle manufacturer or the driver?

Consequently, auto insurance policies will evolve into two components – one related to the vehicle and the other related to the driver.  This is one area where policies will change.

But, an even larger area of change may be how, and where, insurance is sold. Automotive OEMs have never been far from the service space and there will be deeper alliances between automotive OEMs and insurance carriers. In fact, the automotive companies and/or their dealers could very likely get into the insurance business – just as they got into the financing business.

IMS is working with all players in the ecosystem because being proactive is critical to address emerging market opportunities. It’s relatively easy to have relationships throughout the ecosystem. But, change may come from outside the ecosystem.

To sum it all up, we are working closely to anticipate the change and, in some cases, precipitate it.

TU: How might further car sharing, say millennial roommates or even neighbors sharing ownership of a car, also factor into the UBI equation while simultaneously complicating it?

CURRIE: Fortunately, IMS has direct experience in developing a telematics solution for a global car sharing company.

The reality is that all cars will be connected, and some of these will be shared, while others will not. Car-sharing companies can make use of telematics in many ways: first, by monitoring driving behavior.  While rental cars can be abused, vehicles from a car-sharing company are subject to even more abuse because there is low human interaction during the transaction. Users pick up the vehicle without having to face agents.

Second, telematics can help with variable pricing of vehicles in car-sharing fleets. It makes sense that a driver with a bad driving record and/or the tendency to be harsh on a vehicle should pay more. So, telematics can help with variable pricing – incenting drivers to treat car-sharing vehicles with more consideration.

Similarly, telematics can help set the rates that a driver pays for insurance in these vehicles based on his or her actual driving behavior.

TU: How difficult is it for a Canadian insurer to offer UBI policies to US drivers?

CURRIE: We expect both the US and Canadian markets to be disrupted by technology. And, as we are not certain where disruption will originate, a case could be made for an innovative Canadian insurer to offer insurance telematics to US drivers. In fact, we have considered this strategically with one of the broker deployments we are supporting where we suggested that a broker take this innovative model to the US.

That said, there are a number of ways Canadian insurers could offer UBI policies to US drivers, starting with full investments, but also in licensing technology solutions. That would be terrific news.

You can hear more from IMS at the Insurance-Canada.ca Technology Conference, March 9-10, 2015 in Toronto.  Details can be found at the event web site.  Insurance-Canada.ca provides information on technology and insurance, with a focus on the  Canadian environment.

To find out about the latest insurance telematics trends in Canada, check out Insurance Telematics Canada Confernence & Exhibition 2015.  


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