Usage-Based Insurance : Overcoming Barriers to Adoption
Author:CSC Town Hall
Join this panel of experts as they discuss how auto insurers can embrace telematics to attract safer drivers, increase customer engagement, and ultimately reduce risk within insurers’ portfolios, while overcoming common stumbling blocks in implementing a UBI program.
- Tim Kennedy, Director, UBI Product Manager, CSC
- Cyril Zeller, Key Accounts, Scope Technologies
- James Dodge, Senior Consultant, Milliman Moderator
- Jeff Caruso, Senior Managing Editor, CSC
Usage-Based Insurace: Overcoming Barriers to Adoption
Usage-based insurance (UBI) programs can attract safer drivers, increase customer engagement, and ultimately reduce risk within insurers’ portfolios. However, many insurers have held back their UBI programs due to social and technical challenges.
Although usage-based insurance is in its infancy, interest is high and rapid growth is expected, says Tim Kennedy, UBI pProduct Mmanager at CSC says interest is high and rapid growth is expected.
“It’s one of the top new technology trends affecting the industry,” Kennedy he says. “Within fifteen 15 years, perhaps 80 percent or more of auto insurance policies will be UBI-based.”
Kennedy says tToday’s insurance rates are set by analyzing factors such asthat include demographics like location, age and credit score. B but UBI represents a fundamental change. “Using in-vehicle devices or smartphone apps to collect real-time data, insurers can evaluate risk and set pricing for each driver, based on their actual driving habits,” he Kennedy says.
Cyril Zeller, Vvice Ppresident for Kkey Aaccounts at Scope Technologies, says that UBI is just one application for telematics in the industry. “When we talk about telematics in insurance, we’re all thinking about UBI, but this goes far beyond UBI. Telematics can support claims management and optimize many other processes,” Zeller says.
While many cars today come with embedded telematic capability, a large fleet of vehicles remains in service that do not collect data. Zeller says a wide range of devices can be fitted to those vehicles to collect information. “We can supply a dongle, or for more advanced requirements, there are black -box systems. We also have a variety of smart phone applications that can be used,” Zeller says.
The broadening scope of data collected by telematics is raising new questions. James Dodge, a senior consultant at Milliman says regulators are thinking about what’s needed in order for them to do their job. “A lot of what’s being collected is new data, and it’s being put together in new ways. There’s a lot of discussion about transparency and fairness,” Dodge says. “As consumers become more digital-forward, I think they’ll become more accepting of these programs because they’rell realize it nets them something.”
UBI was once seen as spending money to give away money, because insurers discounted UBI premiums, but now we seen there is a strong benefits case across four dimensions, Kennedy says. “You’re better able to match risk based on driving habits. There’s improved claim processing from first notice of loss to predicting repair costs. Fraud detection is improved because of better accident data. And customers use the apps daily to get feedback with features like driving scores,” he says.
“We’re living through an interesting time, and as consumers begin to create demand for these types of solutions, insurers and regulators will have to work closely together to determine better ways to determine pricing, to assess risk and to encourage safer driving,” Dodge says.
“Consumers, I think, will be receptive to the benefits and the new relationship with their insurer,” he says. “Broadly speaking, insurers and regulators need to consider how to do this better because this is disruptive. The industry is changing in real time, so we have to be smart and nimble as we think through new forms of data and new forms of value.”