San Francisco —
According to the survey, interest in pay-as-you-drive (PAYD) insurance has risen sharply in the past year. Low-mileage drivers see it as way to save money on their premiums, while public policy advocates see it as a green product that creates incentives for driving less—resulting in fewer accidents/claims, pollution, oil dependence and public infrastructure cost. In response, some U.S. insurers are moving quickly to introduce PAYD products, while many insurers are taking a more cautious approach.
Key survey findings show that insurers see protection of existing books of auto business as the major driver, and core systems technology as the biggest barrier to PAYD introduction.
Despite the potential of PAYD insurance to unbalance prevailing auto rating models, little research on PAYD is currently available, according to Exigen Insurance Solutions. The provider conducted several polls during its “Pay-Only-As-You-Drive Insurance - Coming Ready or Not” Webinar on Nov. 5, 2008, to find out how U.S. insurers are responding to this interest, their plans for PAYD product introduction, and what they see as the biggest market drivers and barriers.
Exigen Insurance Solutions polled the 163 insurance company representatives from 91 companies that attended the Webinar. Some of the facts that emerged include:
• 59% of insurance company representatives declared their companies have investigated/considered offering a PAYD product.
• Two insurers indicated they would be offering a product by mid-2009, and 12 stated they had plans to do so before the end of 2009.
• The top market driver for PAYD introduction was readiness to respond to protect their book of business from competitors. Entering a new market to grow revenue was second, ahead of entering the market to gain market perception as exercising corporate responsibility with a "green" product.
• 46% of respondents considered the cost of implementing core systems for PAYD products as the major barrier to PAYD introduction. This compared with 20% for consumer privacy concerns, 18% for the cost of telemetry devices, 14% for state insurance regulations and 4% for existing PAYD patent infringement.
"The results indicate that U.S. insurers are adopting a follow-the-leader approach to PAYD that is defensive rather than aggressive," says Fazi Zand, VP, marketing and business development for Exigen Insurance Solutions. "They are clearly monitoring PAYD market developments closely, concerned that if competitors begin to offer a PAYD product, they will have to act swiftly to protect their book of business. The results also reflect Exigen Insurance Solutions' belief that implementation of agile technology is essential if insurers plan rapid new product introductions, such as PAYD programs. PAYD challenges existing systems to incorporate new rating factors and business processes."
Source: Exigen Insurance Solutions
