Telematics & Usage Based Insurance (UBI)
Usage-based Insurance (UBI) represents a fundamental change in the way insurance is underwritten, moving away from proxy-based rating models and history patterns to real-life and real-time data analysis.
In time, it is expected to make traditional methods of risk prediction obsolete and profoundly transform the way risk is underwritten.
UBI is on the verge of becoming a mainstream alternative to the traditional rating systems that shaped the insurance industry for decades. Car insurance is taking the lead with so called Vehicle Telematics (short: Telematics) and the Connected Car. Other products however will follow without doubt.
Telematics concepts are allowing complete new insurance business models with:
- more accurate pricing
- enhanced services
- more customer interaction
- improved loyalty
- less fraud
- proactive FNOL
- better claims management and results
- better claims services.
This new way of risk assessment, claims management and CRM will seriously change the insurance landscape. In the end no insurance company can neglect these opportunities in a highly competitive market where existing business models shipwreck in continuous price-fights and aggregators slowly take over control. Not embracing these new opportunities could also lead to anti-selection.
Opportunity: A mature car market
Car has a head start because Tracking & Tracing, Navigation, Location Based Services (LBS) and Diagnostics (via CAN-bus or ODB2) are already in use for (commercial vehicle) Fleet Management for over 20 years. Consequently there is already quite some experience in gathering, processing and analyzing data!
Modern cars and their drivers have (almost) all the necessary equipment on board. The (additional) costs to make it work have reduced drastically and other obstacles are getting less problematic. The road to become a mainstream tool for insurance is open. A number of large companies in the US and UK have paved the way during the last decade and tested different models.
Models
As an insurance expert in digital solutions, we run several trials to find the right solutions for all insurers needs with connected devices.
We tested a number of different devices (including the data collection and feedback) and apps (web portals and mobile) for years, We are following the market closely and are continuously searching for global best practice. But we are also looking ahead to how technology evolves to make sure we can bring innovation to improve or to give starters the benefit of not being the first.
Telematics & UBI can be implemented in various ways with different business models. Some companies are preferring a “snapshot” of a few months or a few hundred kilometers and the generated profile can then lead to a discount on the existing rating. Others go “deeper” with a strong believe in a connected world and a radical new approach in customer relationship management, continuous risk assessment and sophisticated claims management and services. There are of course several roads that lead to Rome and depending on the situation (position, budgets, learning-curve, target groups, operational status, risk management etc.) any model can be valid.
Expertise
Intsure Technology Solutions can bring in the components to facilitate the preferred model. Like:
- devices (wired or dongle)
- web and mobile applications
- a flexible rating engine
- dashboard & reporting tools
- claims applications
- additional mobile services
- loyalty programs
- customer Private Domain
All the required expertise is available via a pool of experts covering:
- underwriting
- product development
- pricing
- claims management
- marketing
- legal
- actuarial
- analytics
- ICT
We listen to your ideas, questions, needs and priorities. Based on that we give our view on innovative possibilities and opportunities. From there we discuss how to proceed. This can vary from a Workshop to a full project.
Depending on the situation we can quickly put together a team that brings the required elements together appropriately. Adequate and agile to:
- understand UBI and how it can change your current business
- understand key market drivers and barriers
- design your winning UBI strategy
- propose an IT-solution to best fit your strategy and organization
Insurance Market
The leading insurance company in this arena is Progressive (US). Starting a UBI-program in 1998 with Autograph, followed by TripSense, in 2004. MyRate in 2008 evolving into its current Snapshot in 2010. They captured since 2008 so far about 120 Terabytes on 2 million cars covering 1.5 billion trips with 18 billion kilometers driven.
Octo Telematics (launching UBI in 2002) and working together with 7 insurance companies in the US and Canada has almost 200 billion kilometers of driving in their database.
Both are in the meantime quite experienced in processing the data and quickly test new rating factors in an accurate way.
Every single state in the US currently has at least 4 UBI-programs.
The UK is the second player worldwide. A quarter of all under-25’s are insured via a Telematics program.
In 2013 globally about 50 trials and 115 launches were counted. The estimated number of policies is over 5 million.
After the peak in 2006 and the disillusionment in 2007-2009 the UBI market is now slowly maturing.
Outlook
A high level and future proof concept could look like this:
For more information about the Telematics & UBI or the Concept you can contact: ewout@sunfieldconsultancy.com.