Looking Toward UBI 2.0
With the concept of usage-based insurance still unknown to U.S. consumers, it may seem premature to talk about the next generation of UBI. Nevertheless, that's a strong theme of the Insurance Telematics Show, held today and tomorrow in Chicago.
"UBI 1.0 was all about the insurance companies," says Abhishek Peraka, engagement manager for Saama Technologies. "UBI 2.0 is about providing services that consumers want." Peraka was at the conference looking for partners for his company's business analytics services.
Data for risk analysis is important, of course. In his keynote this morning, Robin Harbage, director of Towers Watson, advised companies to identify the data that will be most valuable to them. "Too many customers accept the data that they're given. They should determine what data they need," he said. Ultimately, though, insurers should look way beyond risk. "UBI is a whole new ball game, transforming the relationship between insurers and their customers, and influencing behaviors and the resultant claims patterns," Harbage said.
Speakers at the conference emphasized that insurers should offer a range of UBI products to address various consumer segments. For example, some consumers are totally price-driven. They will go for whatever UBI product gives them the lowest rates. Others will be attracted to a more robust suite of value-added services, such as information to help them drive more safely or more efficiently.
"Success after implement for customer will have a product set and services that meet their needs at price they're looking for.
Insurance company, success looks like happy customers, leading to more customers and more profit," said Nate Bryer, new product development manager for Allstate.
Optimism among show attendees was high, according to a poll conducted by A.T. Kearney. While insurance telematics is a niche product today, 79 percent of attendees think it will become mainstream in the next three to five years.
When polled about the drivers for UBI adoption, a better customer value proposition was at the top, at 19 percent — another example of the growing interest in UBI 2.0. Next on the list was the availability of embedded devices, at 17 percent.
When asked about the impediments to the adoption of UBI, 33 percent of attendees cited customer privacy concerns, followed by the cost of installation and operations, at 27 percent.
The low-hanging fruit in these early days is with the lowest-risk customers, according to Shamik Lala, senior manager with A.T. Kearney. His consulting firm found that that segment, representing 35 percent of drivers, are most likely to embrace telematics.
Their value to insurers is high, according to Lala: Insurers are seeing up to 2 percent improvement in retention, as well as reductions in loss cost and claims frequency.
He told the audience, "UBI is on track to reach the tipping point in next three to five years."
That gives companies just two more years to create the partnerships they need to forge complete value chains, from the device in the car through the data connection to back end systems where data can be crunched to provide valuable insights.
Then, the job is to make consumers understand the value. Harbage said, "Insurers need to understand that consumers will opt in if there is value for them."
