Usage Based Insurance Adoption is Growing Rapidly
The time is right for insurance telematics with the global growth of usage-based insurance to hit over $190 billion by 2026 while some research firm estimating the usage-based insurance (UBI) market to reach over $300 billion by 2026. A recent study by Ptolemus shows that of the 875 million automotive insurance policies, about 20 million were usage-based and the mobile UBI market has grown to 4.8 million policyholders. Technologies have advanced substantially, including data-collection technology, communication techniques, and data analytics, bringing more intelligence and new capabilities online.
UBI – WHERE WE ARE TODAY
Insurers worldwide have set their focus on telematics as the future of creating deeper customer relationships as the total cost of ownership for insurance telematics has dropped dramatically over the last decade and regulatory changes supporting UBI. New data-collection methods, growth of embedded telematics solutions, evolution of a new insurance ecosystem, lower accidents and vehicle theft recovery capabilities including those provided by mobile and hybrid solutions are the key driving factors for usage-based insurance.
These factors signal a shift in the market and become important when constructing a business case for UBI. Business case considerations continue to be a widely discussed aspect of insurance telematics when determining market entry strategy including increasing use of insurance models such as pay-as-you-drive (PAYD) and pay-how-you-drive (PHYD). A knowledgeable telematics service provider (TSP) can help weigh the issues and tradeoffs when evaluating the business case for a UBI program.
THERE IS A CRITICAL MASS OF UBI PROGRAMS
Insurance telematics technological advancement is maturing at a rapid pace and with the growing awareness among consumers is boosting the usage-based insurance market. The initial stage, which has already come and gone, focused primarily on cost factors. During the initial UBI ramp-up period, development concentrated on providing value for insurers, dealing with deployment cost factors, implementing back-end communications, and deploying OBD (on-board diagnostics) technology. The engagement was largely confined to participants within the auto insurance ecosystem.
In its present-day form, UBI offers more expansive possibilities where on a regional basis, North America, Latin America, Europe, Asia Pacific, and the Middle East & Africa segment the global user-based insurance market. There is an increased focus on extending value and value-added services to insurance firms, consumers, and partners, as well as enhancing pricing models. Customer relationship management is much more important. Also, agile technology and new data collection mechanisms, including mobile telematics solutions are being quickly adopted as a way to better align with changing consumer lifestyles. The connected car ecosystem is growing, bringing numerous opportunities for enriching customer experiences by catering to specialized interests and meeting customer demands for more convenience and support. As the connected car ecosystem expands, it is moving rapidly into an era of enhanced driver intelligence.
The initial model used by first movers typically structured programs solely around the attractiveness of discounts to customers. Today, there is a far greater understanding of the potential to provide additional services that highlight customer convenience, safety, more direct relationships, and better communication with the insurer. By providing these types of services, insurers can successfully establish long-term relationships with policyholders, providing incentives and rewards coupled with the pleasures of driving. These incentives can now be informed and shaped by the deeper insights provided by telematics data and the intelligence derived through analytics engines.
Looking ahead, the connected car ecosystem will likely flourish as it ushers in an era of sophisticated data analytics and improved scoring. More powerful mobile applications, deeper Internet of Things enablement, innovative new data-collection options, optimized policyholder personalization, and extensive value-added services will develop over time.