Either the telematics buzz machine has been set to hyper-whine, or there is a strong undercurrent suggesting a usage-based insurance breakthrough into the mainstream of underwriting in North America. We’ve seen a large wave of articles crossing our desk (primarily from the US). In addition to the US buzz, we’re finding more serious conversion among senior Canadian business and IT managers (virtually all of whom don’t want to go on record).
So what is the buzz? Here’s a sampling in three main categories:
Third party players are coming to the table. Back in June, we noted that Verizon had purchased Hughes Telematics, which was supplying devices to State Farm in the US.
Last week, Sprint announced the formation of an Integrated Insurance Solutions group which will offer a complete usage based insurance package to insurers, including the wireless services for data transmission, the device itself, and even the software required for scoring the behavior of the driver. According to Sprint, industry consultants indicate that many insurers who wish to launch usage-based insurance programs are facing significant barriers to entry. Some of their estimates indicate that it could take as much as five years for the development of a new program, for it to be tested in trials, and for the actual launch to occur.
Sprint said it had been working with Allstate unit Esurance on a pilot program in Arizona that was recently expanded into Texas.
Beyond Verizon and Sprint, there are numerous other players with a range of offerings. Several LinkedIn groups are devoted to Insurance Telematics solutions.
Insurance regulators are opening to usage-based insurance. After consumer acceptance, the primary concern about the future of usage-based insurance is the willingness of regulators to accept different rating criteria. The US has a very fragmented environment, however a recent Telematics Update report suggests that usage-based insurance programs are finding paths to approval. Moreover, the sentiment of regulators towards usage-based insurance might be inherently positive. Eric Nordman, director of regulatory services and CIPR for the National Association of Insurance Commissioners (NAIC) is quoted in the report saying, “We view telematics as the next evolution of risk classification and as being perhaps more accurate. It has the potential of recording information at a very detailed level.”
Progressive’s leadership: Telematics penetration, heavy new promotion, and corporate results/commitment. By all accounts, Progressive has taken the lead in North American usage-based insurance with its ‘Snapshot’ program. It seems that the promotions are taking hold. A recent report suggests there are now 900,000 subscribers (about 10% of its auto book), up from 250,000 in August 2011. And the company continues aggressive product development and promotion. Progressive has just launched a promotion which offer a trial subscription to Snapshot. At the end of the 30 days of trial use, Progressive will advise the prospect how much they could save over their current policy. (As we write this, Flo is on the TV with a new ad… very Apple-ish.)
What does Telematics mean to Progressive? MarketWatch recently reported that the company’s executives found that Snapshot “was even better at predicting driver behavior than they’d earlier thought and boasted that the program was boosting the average premium per customer by 13%.” The same report quoted Progressive’s CEO Glenn Renwick telling investors and analysts that Telematics technology is “one of the most important things I’ve seen in my career.” Strong stuff.
So what do you think: Is this just buzz that will die down when the market hardens? Or, will this get traction, but fail to cross the 49th parallel? Or, are Canadian insurers on the edge of bringing this to market?
Use the comments section below and drive your point home!