After coronavirus, UBI gaining steam among consumers
A majority of U.S. consumers (63 percent) are open to changing their current auto insurance policy for one that has a telematics- based premium, according to a new report published by mobile telematics provider Cambridge Mobile Telematics (CMT) and insurance think tank IoT Insurance Observatory.
The study is based on a series of surveys of drivers the organizations conducted over the past several years, to gauge their attitudes toward usage-based insurance (UBI). In all, 2,500 individuals from the U.S., France, Italy, Mexico, Brazil, and the U.K. were surveyed.
Many of them are ready to work with insurers to price their insurance based on how they actually drive, rather than on traditional insurance rating factors such as ZIP code, age, gender, etc.
“We've done several of these types of surveys over the past few years, and we have seen a consistent level of interest and openness from consumers, preferring a policy based on how safely they drive vs. other extraneous factors,” said Ryan McMahon, vice president of insurance and government affairs at CMT.
“The gap in the past has been on how many consumers were offered a policy based on how they drove,” McMahon said. “That gap has been relatively large at times, but since March we have seen a more concerted effort by insurance carriers, agents, and customer service representatives to focus heavily on price and ultimately the value that they are delivering consumers.”
In fact, the shift in thinking has increased since the pandemic has drastically changed driving patterns, according to the report.
“Due to the economic challenges presented by the pandemic, consumers are becoming more focused on how much value they're getting from their insurance policy,” McMahon said. “We've seen the results of that manifest in consumer's interest in business models that have been available previously but not as heavily focused on by most insurers as pay by mile, or pay how you drive-based policies. We have seen a very strong response to this focus and more consumers are joining telematics programs as a result.”
As of now, only 5 percent of U.S. drivers use a telematics-based policy. This shows a significant disconnect between consumer interest and current offerings, according to the research.
Among other key findings, U.S. drivers are open to many different insurance value proposition, including upfront discounts, rewards, and discounts at the time of renewal—and a majority are ready to switch to UBI now.
Young, city-dwelling drivers are the most likely candidates to take on connected insurance, but each age group surveyed showed significant interest in this approach. More than half of the respondents (52 percent) would look to traditional insurers to find telematics programs, but 20 percent chose non-traditional technology companies such as Amazon as a future desired option. This indicates an upcoming challenge for current market leaders, the report said.
“Ultimately, the more consumers learn that they could be paying substantially less for insurance if they're a good driver or open to becoming safer and being rewarded for it, the more consumers than not will want to learn more,” McMahon said. “The biggest change is in the technology; mobile telematics is much more approachable for consumers than previous iterations of the technology.”
Now, insurers have the ability to launch new business models, provide feedback to drivers, and bridge the gap, McMahon said. “The biggest and more substantial change is that consumers have the ability to accurately connect their driving to the price they pay and, with that type of feedback the results are incredibly favorable and fair. Now that more insurers, agents, and customer service representatives are helping their customers learn about the technology, consumers are responding.”