UBI slumbers in India’s bargain basement

Indian motor insurers have been pursuing UBI in a “wait and watch” mode so far. Following nation’s first insurer-led UBI initiative in 2013 by Liberty Videocon, almost every general insurance carrier has conducted pilot projects.

Despite the media’s interest in even the slightest of developments, very little is known outside the confines of those pilots.

“Most insurance companies have learnt from the pilots that UBI may be possible to offer to fleet customers not to general public,” said Mallesh Reddy, CEO of DriveSmart Global. “At present, they are aligning their future strategy with the business benefits of telematics.”

According to Reddy, the wait-and-watch approach has always been the success factor for just about any emerging technology in India and will hold true for UBI as well.

Puneet Sahni, head of product development at SBI General Insurance, said that consumers are receptive to such experiments but the trials are too few to effectively bring about any substantial change in the overall adoption rate.

The roadblocks

So, why hasn’t the UBI train left the station? The Indian market, owing to its price conscious nature, presents a few roadblocks to UBI adoption that have been widely reported. Firstly, the average motor insurance premium is already too low to be given a further discount on. Currently, the average premium size stands somewhere between 0.5-2% of the vehicle’s value, i.e. $100-$180 (£90-£161), which is far lower compared to US and European countries.

Secondly, the entire device set-up which includes an OBD-II dongle, subscription, mobile app costs somewhere around $30-$50.

“Auto insurance is going through a turbulent experience and all insurers are facing high loss ratios in India; hence, neither the insurer nor the insured is willing or is ready to pay for the deployment of the telematics device,” adds Sahni. “Who will absorb the upfront cost is question we all need to really see.”

Ritesh Srivastava, senior manager of telematics at Toyota Tsusho Media Services, believes that high device cost is a global issue but a model like the pan-European eCall mandate, which requires standard fitment of telematics devices by OEMs in new vehicles by April 2018, can resolve this.

“But, the existing vehicles will still be under the pressure of high costs,” Srivastava added.

Some companies are also exploring smartphone-based UBI model because of its ease of deployment and large subscriber base of more than 1Bn users. For example, Reddy’s DriveSmart Global is working on a driving analytics app/SDK priced at $24 and ready for pilot implementation, according to company’s presentation.

But, he still finds it challenging for the smartphone UBI model to take off. “Not everyone having a smartphone activates a data connection in India,” said Reddy.

Srivastava questions the veracity of smartphone data which he believes will be insufficient to effectively determine the driving behaviour of an individual and hence calculate the premium. “When you do steep cornering, that is a bad driving habit,” he states. “But owing to the low quality smartphone sensors, it goes unreported.”

The ecosystem influx

Looking to the future, a greater collaboration between insurers, telematics service providers (TSPs) and OEMs can increase the commercial viability of UBI in India.

Sahni said that the entire ecosystem participating can effectively lead to sharing of additional cost of telematics device and telecom costs associated with UBI. “Since all three players would gain with the collaboration, this would work well to penetrate in market like India,” he adds. Sharing of costs can factor in the premium ticket size so that the end-user gets it complimentary.

Srivastava says that while insurers are interested the driving data feed, OEMs have greater interest in telematics-based CRM and vehicle maintenance. “UBI can lead to a win-win situation for both.” He pointed to the Toyota Smart Center in the US, which collects data from luxury segment vehicles and the same could well be used for UBI.

Also, there are important lessons to be had from the UBI data, gathered in both the UK and Italian markets to come to a workable solution. One is clearly to move beyond discounts and embrace other value-added services. “There are clear advantages to the industry in terms of reduction in frequency of accidents, savings in case of fraud circumstances quoted for a claim and huge savings in fraud for third party claims,” Sahni concludes.

Srivastava mentioned few good applications that are particularly relevant for the Indian economy. This includes giving licenses to learner-drivers based on their driving behaviour, vehicle permit violation monitoring, congestion charges, teen driver monitoring and more.

Finally, staying relevant in the ecosystem is of paramount importance for the insurers. In the age of immediate gratification which is pioneered by e-commerce players, customers want something that gives them value every month, every week or even day. Currently, the involvement of insured is limited only at the time of renewal or claim. In most cases, consumers don’t even know the name of the insurer but only remember the agent or the dealership providing the cover. In this scenario, a customer waiting for a complete year to get a $10-$20 discount does not seem like a valuable proposition.

One solution to this is a ‘gamification’ model or earn-as-you-drive, wherein good drivers are incentivised and rewarded on regular basis. The model is currently being pursued by Harman International in India. If more such models prevail in coming years, the UBI train will soon leave the station with a large number of consumers on board.

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