Fewer than one-third (30 percent) of insurers have no current plan all to offer insurance telematics, according to “Telematics/Usage-Based Insurance: Insurer Priorities and Plans,” from Strategy Meets Action. And while 70 percent of those surveyed are in some stage of planning, piloting or implementation of a telematics program, just 18 P&C insurers have an active UBI program in more than one state or province.
“2012 was a breakthrough year for UBI as Progressive brought it to the mass market in the [United States]. 2013 is likely to be characterized by a rapid expansion of the number of companies offering UBI options to their customers,” said Richard Welch, SMA Guest Author.
Of those insurers participating in the survey, most (57 percent) said UBI is predominantly a rating accuracy play, which SMA acknowledged as a logical assumption, as the auto insurance value proposition is primarily about price. However, 43 percent said UBI’s value is in reducing loss costs by improving driver behavior and increasing retention (43 percent). Attracting new customers and claims control followed distantly, with 14 percent each.
UBI Features offered to customers:
With the majority of insurers extending discounts to UBI customers for signing up, rather than waiting for driving experience to develop, SMA said insurers believe it’s necessary to offer financial enticements to prompt customer participation. Only one company surcharges for bad driving, and only two are passing costs back to consumers, suggesting concern that potential financial consequences to customers deter them from buying UBI.
Data elements collected, used or not collected by insurers:
While the cost of UBI devices has continued to decline—currently $50 to $75—cost is the single largest challenge to UBI growth, according to both business (63 percent) and IT (50 percent) professionals surveyed; experience was next, with 46 percent of business and 42 percent of IT; customer interest 37 percent business, and 33 percent IT; patent issues 30 percent business, 17 percent IT; information privacy 11 percent business, and 17 percent IT; state regulation 2 percent business and 17 percent IT.
More than half of insurers said UBI measurement devices will be built into vehicles, and 20 percent said smartphones likely will be the primary data collection device. Another 20 predict a fragmented data collection landscape. One concern that many insurers have with telematics is that the vast data collection and analysis will drain too many resources to be worthwhile. However, as telematics technology improves, it will become easier to track, store and analyze the incoming data.
Click here for a slideshow revealing the "11 questions to ask before developing a UBI strategy."
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