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UBI: An Innovation in Insurance – Really?

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In 2012, the top five connected apps projected by 2020 were: car, clinical monitoring, security, assisted living and . . . “pay-as-you-drive insurance.” In 2013, usage-based insurance stayed in the top 10 predictions for Machina Research.

In support of insurance apps, telematics has definitely arrived! Globally, more than 130 insurers have launched UBI products.

Will consumers see UBI as an innovation?

First lets address a common objection – what about privacy – IBM found more people are increasingly comfortable with sharing personal information when they get something in return. Although they are less ready to share information where behavior is measured, more than half of consumers are willing to share as you will see here.  Speaking personally, I signed up for a second telematics device because on the matter of the first one I am getting something in return (mentioned in my January Intersection post).

Assuming consumers aren’t going to slow down interest and adoption of auto insurance with UBI telematics data in the product, how can insurers avoid the zero sum game?

Steps on the ladder of innovation

Instead of just improving products to comply with new regulations or to offset historical claims experience, there is now an opportunity for insurers to use technology to rethink their products and services. They can change what (and for another time how, when and where) they do for consumers enabled by capturing and analyzing data that wasn’t previously available. You can group your ideas in three categories – incremental, added value or market expanding.

  • Incremental change would be staying close to insurance services that are provided today but, doing it differently, for example, using the telematics data for real time automated crash detection – not just pricing discounts.
  • Added value would be enhancing the service and value to the individual and to the community, like knowing there really was a crash and the impact of the crash (using speed data) and the degree of injury or severity of the crash (not just from the air bag deployment) to dispatch emergency services or prevent fraudulent claims – lower the cost of insurance to all – not just individual pricing discounts.
  • Market expanding is really thinking out of the box. My insurer now has more than six months of driving data and on a monthly basis (opportunity for daily), and I can see how my driving performance is directly related to the insurance premium I pay. I suspect it’s possible to understand not just how my car was being driven – but, when it was being driven by different types of drivers – even down to one specific driver. It’s possible we can insure the driver rather than the car. This could be essential to the future business of insurance when the connected car and driverless cars will arrive in my life time.

That’s bringing innovation to insurance – Really.

Christine Haeberlin, Business Development Executive, Insurance, IBM Canada. Christine is IBM Canada’s insurance industry leader, where she is responsible for developing integrated industry solutions that achieve targeted business outcomes for insurers.

ICTC-wheel-plain-r60Editor’s Note: Christine will be presenting on Planning for Success with a Telematics Programat #ICTC2014.

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