UBI Will Find Room to Grow But it Will Take Time

With most new cars now equipped with connected features or ADAS, there has been a change in the way auto insurers handle policies.

As drivers become more aware of the benefits of advanced safety and connectivity features in new cars, this creates new opportunities for automakers to partner with insurers to increase adoption of UBI and other telematics-driven offerings. Andrew Brown-Allan managing director of Trak Labs at Trak Global Group (TGG), which provides the technology for UBI policies, explained that in the UK insurance market UBI is aimed at young drivers, because it’s focused on correcting high premiums for new drivers.

Carrot Insurance, which TGG launched in 2012, uses its own telematics black box and an app-based platform for customers with more driving experience. “It’s increasingly common to get into your vehicle and have the ability to activate certain services,” Brown-Allen said. “We will we start to see insurance products baked into the car, where will they enable you to drive for certain period of time.”

He said TGG is finding is an appetite for UBI in the UK and right-siding people’s premiums by how much they drive. “The trick there is getting the policies to low mileage drivers. Pay by mileage is what you’re going to see more of those coming to market,” he said. “So far there has been a relatively limited number of partnerships between OEMs and insurers and that may be owing to pricing, proposition, or timing. Maybe the market is just not ready for it.”

Paul Stacy, director of research and development and director of automotive development for Europe the Middle East and Asia at LexisNexis Risk Solutions, told TU-Automotive UBI is a very niche market today because of the expense of getting the data. “When the connected car comes along, then that’s going to be much cheaper,” he said. “The acceptance of UBI has grown significantly and awareness is high. What needs to happen is OEMs need to get their heads around consent required from customers and GDPR processes.”

Stacy noted his firm has been getting invited in educational workshops with carmakers, something he says would not have been achievable even last year. “They understand they need to make customer data portable,” he said. “They’re going to be really thinking about how they do that in a security compliant way and to bring this data out to be most effective for their drivers.”

Stacy explained one of the big opportunities for insurers is looking at customers who have invested in ADAS systems and said automakers can look at the static data they have now and use that as a jumping off point until the amount of data grows. “If you bring me one percent of the market I’m not changing my underwriting plans, but bring me 60% of the data, that’s interesting,” he said. “It takes seven years to get a data exchange up and running and we’re at year one. It’s going to be five to six years before connected car data can be used. Some are hoping it will be earlier but that’s realistic.”

Juniper Research senior analyst Nick Maynard said in most cases, telematics packages are included in a subscription when the car is first purchased but this does not necessarily mean that the insurer will automatically get access to the telematics data. “In many cases, except where insurance is offered when buying the car, the user must choose to go with an insurer that can utilize telematics data. Therefore, the choice is actively the consumers,” he explained. “It remains unlikely that information will be passed automatically between telematics systems and insurers without the insured party’s consent, regardless of whether this is an OEM-fitted or aftermarket telematics device.”

However, he noted that, in a post-GDPR world, there are concerns around how data is used. “When data is shared, this becomes a cyber-security vulnerability, which must be addressed by insurers and their telematics providers,” Maynard explained. “In the case of knowing the use of their data, this is usually set out in the insurance agreement.”

Maynard said the biggest problem with telematics-based insurance is that many drivers still do not like the idea of having a system monitoring them in the vehicle. “As user discomfort reduces, more insurers will turn to telematics as a solution for their underwriting and pricing challenges,” Maynard explained. “This will naturally lead to a more congested telematics market, where price and app features will become crucial differentiators.”

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