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Pay as You Drive Gains Traction; Insurers Offer Incentives

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We have written about the benefits accruing to insurers who adopt Usage-Based Insurance (UBI) schemes, including competitive advantages of better underwriting data and marketing advantages derived from micro segmentation. But why should a driver use it?  A recent announcement in the US market offers instruction on how insurers want to increase the uptake of this approach.

State Farm has just introduced a new service called”In-Drive”.  According to Insurance & Technology the service “provides a device connecting vehicles to safety and diagnostics options, including one-touch emergency response, roadside assistance, stolen vehicle location, vehicle diagnostic alerts and maintenance reminders, location services and speed alerts. The service also includes a dedicated website and smartphone app for remote and mobile access.”

The service was developed in partnership with Hughes Electronics and essentially extends the benefits of On-Star (widely promoted by GM as a unique feature of its vehicles) to a significantly wider population.

Towers Watson in a recent article has noted that consumers’ concerns about privacy are a major source of resistance to UBI schemes, and is a reason why all insurers to date have offered it as a voluntary program.  However, the insurers are best serve by attracting as wide a population as possible (to have the largest amount of data to correlate to claims and other costs).  The solution is to offer incentives, such as the In-Drive program.

It also is an entree to what Towers Watson refers to as the major opportunity to “to significantly alter the insured’s driving behaviour to help lower loss costs.”  This type of behaviour modification has worked well with commercial fleet management (We noted Zurich’s approach in this space in January) , and has the potential to be a win-win for private passenger as well.

This sounds like a real win-win.  Now, when are we going to see Canadian insurers joining the movement?

 

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