Safety, Convenience, Discounts the Keys to UBI Expansion

When developing automotive UBI products, insurance providers must often employ innovative approaches to ensure their offerings are exciting for customers.

So, what types of strategies do insurance providers employ to identify what has value to the customer and create a minimum viable product?  What are the main hurdles they face and what strategies can staff in large corporate insurance providers employ to create the necessary flexibility to explore types of value creation for UBI products?

Customer-centric

When it comes to developing programs and creating value for customers, Tim Grant, senior director of auto underwriting for insurance at LexisNexis Risk Solutions, recommends that insurers begin by reviewing their segmentation strategies and asking whether their business is heavily influenced by particular automakers, or if want to test the market with all companies, as well as whether there is a specific customer segment they want to retain or attract.  Moreover, although it was initially widely believed that price was the only reason consumers would be interested in a UBI program Grant also reveals that consumer research continues to show differently, with US consumers reporting they would be willing try UBI but haven’t been offered a program.

“We conducted a survey of UK drivers and found specific consumer segments where buyers were most willing to opt-in and exchange vehicle data for insurance products.  This data is being used to grow the addressable market into new segments and expand the total addressable market. Insurers and automakers are starting to understand that discounts and services can attract new business and keep consumers engaged with positive brand association,” he says.

Another interesting example is Vivadrive, which has undertaken several projects and pilots in Benelux, France and Poland motivated by a customer-centric approach.  As Mateusz Maj, co-founder and vice-president of product at the company, explains, this means that staff interview customers and set up simple surveys to find out what they value most.  The results of these studies are then compared with insurer’s expectations in relation to factors like retention improvement and claims reduction.

“Equipped with such a knowledge we jointly set up a minimum viable product, deploy it on a market, test it and come up with a viable commercial solution.  We try to apply a lean and agile approach to UBI innovation and our projects are iterative and multi-phased,” says Maj. “The commercial fleet B2B segment is a way more interesting segment, where telematics offers clear benefits, via lower fuel consumption, lower claims and so on, and fleets can make telematics compulsory in their cars.  We are currently developing products that address problems of both car and truck fleets.”

Buy-in

When creating such minimum viable products, Grant explains that many insurers also start with either one key segment of their book, or one geographic region if they are global, or one piece of data to analyze, such as mileage, initially.

While he believes this is a good approach, he stresses the industry could stand to be more bullish and move more quickly, particularly since new technology has reduced the cost of driver data acquisition, consumer acceptance is growing and telematics solution providers have pre-built systems to scale.

In addition, Grant observes that insurers have access to and should consider a number of necessary components, ranging from compliance, security and privacy, data collection methods and options and storage for second-by -second data to scoring to make the program meaningful for underwriting and evaluation, a customer interface to communicate via dashboard how the consumer is driving, offer feedback and how it impacts premium and customer support channels to answer questions and help consumers and agents. “Insurers must also consider what their specific customers want in a UBI program and what they see as valuable.  Leading with a safety, convenience or discount message will resonate by varying customer segments,” he says.

From an insurer’s perspective, Grant also argues that getting buy-in across the organization to build a UBI program is key and a challenge at the same time, and points out that many insurers are still taking a wait and see approach to UBI that can result in adverse selection because the rest of the industry will end up so far ahead. “Because we saw this same phenomenon when credit was introduced, we recommend every insurer at least start testing data to better understand how it impacts the insurers’ book today and how even more sources of data will impact their book in the future,” he says.

Flexibility

As far as the creation of the necessary flexibility in large organizations goes, Grant also reveals that insurers are employing various strategies for their UBI programs and he reports that LexisNexis has seen a broad spectrum, from very small internal teams using shared resources to dedicated teams and even spin-off organizations. “Large corporate insurance providers are generally the most committed and pursuing many models to understand how this evolution of UBI and driving data will affect their finances, policy performance metrics and customer experience,” he adds.

Generally speaking, Maj argues that many big corporates are afraid of launching innovative projects, largely because staff are afraid of taking personal risk and the company is fearful of losing reputation. “There are rare examples, where a company already has a flexible start-up culture that allows taking risk and experimenting.  From our experience, silo-type companies prefer running a small internal pilot, either with staff or a limited number of customers. Mostly it is not enough to battle-test the new approach,” he says.

In his view, the best approach is to enter the market with a small-scale project that allows the testing of different aspects of a new solution. “If it does not work out, the risk of losing your brand reputation or customers’ trust is very low. In your communication you need to clearly state that it is a test and that customers are helping you build a new great product.  For sure they will appreciate your transparency and the fact that you treat them as partners.  It worked out very well for us in our project in France with LSA Courtage,” he adds.