Sell UBI tech cheap and stack the policies high!

UBI will only spread further than the young or high risk driver market if the technology can be made available cheaply.

That’s the opinion of Paul Stacy, telematics director and founder at Wunelli, a LexisNexis company, who claims that the US and UK markets could grow to one-in-six policies within the next three years if affordable telematics solutions are brought to market.

Speaking to TU-Automotive, Stacy said: “The problems being faced with a lot of telematics is that it is still expensive. UBI is heavily penetrated now in the young driver space but that only represents 3-4% of the market.

“So, while a lot of insurers come to telematics events, market penetration is still very low and the problem is simply that the solutions are too expensive.”

Stacy was talking ahead of Wunelli’s expected launch of a power-output plug-in USB charger that doubles as an on-board telematics device providing much of the data the costly ‘black box’ could furnish insurers.

As yet no prices have been confirmed but Stacy promises it will be affordable for most insurers to promote to customers.

He added: “Personally, I’d love to give a telematics solution away for free but that would involve a huge cost to us. So, the next best thing is that we make things as cheap as we possibly can and our 12V device is just that cost problem solution.”

And he believes the cheap plug-on UBI solution will attract customers to explore services and rewards insurers can offer.

Stacy explained: “The services will still have crash notifications, they will still have driver behaviour profiling, we’ll still have feedback, there’ll still be discounts and social treats and all those sort of things, it just brings the cost down.

“The issue has been getting to a point where they can relax the filter rules they have and move it into a different market segment. So, people who have a full nine-years plus no-claims bonus will get an aggregator quote and will be offered telematics.

“It may be a different type of offering than we have seen so far or it might just be exactly the same thing because one-in-10 will go for telematics and because there are so many more of this kind of consumer, a one-in-10 success rate could take telematics to a 20% share of the market.

“We’re just in a massive log-jam at the moment, stuck at 3% although even this is growing. The telematics market grew about 40% according to industry figures but that means market share went from, say, 3.1% to 3.9% – still not big numbers and a lot of scope remains.”

Stacy admitted that Wunelli’s 12V plug-in will still have a way to go to get insurers on board but that he believes it could lead to a breakthrough the technology seeking greater market penetration.

“This will take time,” he conceded. “All of our partners make their living out of managing risk and so they don’t tend to do things too quickly and take more risk than they need.

“We have to convince them of the integrity of the solution, use proof of concept trials, and this takes time. With brokers they can be a bit more innovative and act faster and I predict the broker market will pick this up pretty quickly and we should get good volume through this market and then the insurers will follow.”

He dismissed fears that the simple plug-in would be prey to more instances of tampering and fraud arguing that low risk drivers would not realise the same incentives as high-premium payers.

And he said the lucrative mature market held sheer volume as its main attraction for insurers to promote UBI solutions

He explained: “It will be done through premium with some small discounts but you only need 10-15% of the market to be self-selected out to have real problems with loss ratios with the remainder. What happened with young drivers is that when we launched Coverbox, we cherry-picked all the good young drivers who were prepared to be monitored out of the market so we had a lot of premium coming in and not a lot of claims going out. It was a stunning success.

“This amounted to 1-2% of the young driver market with about 40,000 policies. Yet that was enough to destabilise the rest of the market. So, with the mature market, you only need a handful of people to get involved with UBI and the rest of the market starts seeing their premiums start going up!

“This ripple effect won’t be as dramatic as that we saw in the young driver market but there will still be an element of this. With mature drivers we have to be clearer about the value proposition, possibly with feedback on driving behaviour, social rewards, free coffee at some chains, etc.

“With this approach I can see the market swelling from 3% to 15% in some three years with solutions that are cheap to get onto the market.”

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