- Where Insurance & Technology Meet

Marketing UBI to the Masses: Fries With That Discount, Sir?

Telematics and Usage Based Insurance (UBI) promise substantial benefits to insurers, and, presumably, insureds as well.  However, as we have noted, consumer demand has yet to materialize in Canada.  A recent article suggests a novel approach to encourage this demand.

Telematics issues and opportunities will be featured at the 2013 Technology Conference, In preparation, we’d like your thoughts on consumer demand and possible new marketing approaches.

Are we assuming too much about consumers’ interests?

In a recent  article on Usage Based Insurance posted on the Telematics Update site, Roger Lancelot, Associate Director at marketing forecaster,  Strategy Analytics, challenges some of the assumptions that insurers are making about consumer uptake for UBI and makes an interesting proposal that marries UBI with location based marketing to create, what he suggests will be, a more perfect storm.

Lancelot notes that insurers have taken the tack of using discounts for better driving behaviour to lure customers.  He suggests that this may attract some consumers, but doesn’t work well for a wider audience; noting that there are fewer than 2.5 million UBI users world-wide.  He writes: “The daily relevance of an insurance discount is less a benefit than a sword of Damocles swinging over the head of the driver in case that driver deviates from his or her previously safe pattern of driving.”

Will consumers respond to an affinity approach?

The solution, according to Lancelot, is a “comprehensive affinity program” which would see insurers, governmental entities, and others interested in incenting good driving behaviour, link up with suppliers such as road side franchise operators to reward  “good behavior with more than just insurance discounts based on intrusive tracking systems.”

Lancelot wites: “A free cup of coffee, tank of gas, parking space, hamburger or oil change ought to be enough to convince nearly any driver to be willing to share their location information and vehicle data.”

Other approaches …

We have noted other approaches, including partnerships with driving schools.  We also have a nomination for an Technology Award for State Farm Canada’s new app which allows drivers to monitor their own driving behaviour using their cell phones.  This is intended to encourage safe driving generally and, presumably, promote the State Farm Canada brand.

It appears that marketing might be the battle ground for the success of UBI.

What do you think (and where you can hear other thoughts)….

We’d like to know what you think.  Is Lancelot right that lower premiums are not enough to promote UBI?  Will safer driving itself incent insureds?  Would you make insurance decisions based on free Timmy’s for the policy year?  How about free Starbucks?

Leave your comments below.  And, if you want to get into a live conversation, register for the 2013 Technology Conference March 18/19, 2013 in Toronto.  There will be several sessions, including a Day 1 Telematics and UBI Boot Camp which will feature experts to address a variety of issues, including consumer adoption.

And, we will offer you free coffee.


Michael Erlich

A very interesting article. Consumer acceptance will be achieved when UBI costs are clear to the consumers. No consumer can understand subjective insurer rating attributes such as cornering, harsh braking, accelerating, etc. Can these attributes really be quantified objectively? Can they be quantified accurately without knowing road conditions, weather, cause for acceleration, etc.? Even recording driver’s speeding covers only the insurer’s conceived risk when exceeding the speed limit. A much riskier behavior is when a driver drives too fast when road conditions are bad (ice, rain, wind) and without exceeding the speed limit. This really risky behavior is not taken into consideration by the insurer when the risk factor is calculated. In addition, I have not seen any data showing that a specific driver, John Doe, who was defined as a risky driver based on recorded telematics data of acceleration, speeding, etc. was involved in more accidents than Jane Smith who has been using telematics but not defined by her insurer as a “risky”. General statistics showing that many accidents happen at higher speed than permitted, do not necessarily apply to the individual who exceeds the speed limit regularly.

To gain consumer acceptance you don’t need more data. You need to record the most relevant data that define the risk in a sufficient manner to make the insurer comfortable when offering a discount. Noble ideas of teaching consumers how to improve their driving habits have not convinced drivers to flock to UBI programs. Recording behavioral data increases the cost of providing UBI policies and certainly has not shown to be attractive enough to people to make them join. Limiting data to how long and how far the vehicle is being driven, at what time of day and day of the week define a major portion of the risk. Recording where the vehicle was driven adds to the risk assessment. These factors are easy to quantify and are easily understood by consumers. Such solutions are currently available in different hardware configurations including self-powered, self-installed units.


A “comprehensive affinity program” should be a part of the consumer acceptance process/offering but the bottom line is going to be “how much will I save”. A 15% discount incentive to install the device to help insurers collect enough data in order to determine a baseline is necessary but still unattractive to the average driver. If you want credible real life data then give drivers one year of free insurance along with the device and they’ll give you “unmodified” normal driving behaviors straight up.
This should give UBI a shot in the arm and allow actuaries to get a real feel for where UBI can and should go from here without the marketing spin and BS that will go with this potential market disrupter.

Blair Currie

The thinking with this post is spot on, for without marketing to the end user, Usage based insurance will be at best an uphill battle – the proof of this being the Strategy Analytics figure that there are “fewer than 2.5 million UBI users worldwide. To give this some perspective, there are approximately 250 million vehicles in the United States, indication a penetration rate of only 1-2% of the total vehicle population.

A.Marketing Mix Solutions for UBI

If the lack of Marketing is the problem then what is the solution to this problem? Clearly there are issues with all the classical elements – the “4P’s” of the marketing mix including:

1.Product – UBI needs to appeal more to the consumer than only a discussion about price. The proposition of receiving a lower price in exchange for providing an insurance carrier with private information such as location and behavior will appeal to only a small segment of “good drivers”. In this sense it is self-selecting.

a.) Share data with the policyholder/driver.
To gain broader appeal there needs to be more consumer pull in this “B2B2C model. For a start the insurance carrier should consider sharing the data with the policyholders/drivers in the form of a driving record or score. A driver’s behavior should be ranked his or her peers and the insurance carrier or partners should provide tips into how to make them safer, smarter and more environmentally conscious behind the wheel. This driver score could be a service that transforms the entire auto insurance model from the policyholder being a supplier of capital to the insurance company becoming a true service provider. This move might even avoid the need to give a price incentive to exchange for personal data.

b.) Value added services.
Another way to increase consumer demand for UBI is to provide value-added services such as Automatic Vehicle Locator (for those who “lose” the vehicles in shopping malls parking lots), Road Side Assistance, Two-way in vehicle communications (eCall and bCall and alerts for speeding), Infotainment inside the vehicle. It’s now possible to add custom features to appeal to different types of drivers and to differentiate UBI programs.

2. Promotion – Marketing Communications need to be an integral part of any successful UBI program. At this point only Progressive is heavily supporting UBI in the United States which is one reason why the product has not taken off. We are starting to see other companies prepare to support their UBI programs, but at this time only Progressive is paying for advertising, while others are taking a lower key approach through direct selling and some public relations. So at this point in time Progressive is both support the entire category and defining it as a way to discuss pricing only. That’s a shame because telematics is much more than pricing. It’s a way to establish a relationship with policyholders.

While some policyholders see the “spill” from Progressive’s US based advertising, most people in Canada are neither aware, nor do they understand UBI. So somehow the “UBI Industry” will need to educate consumers on the benefits and features of UBI. There are many ways to do this but I think it will need a combination of bought, owned and earned media support. (This is a huge topic in itself.)

3. Physical Distribution – channel management is a very important consideration for the success of UBI programs. Those who have run UBI programs will know that consumer adoption can be a big challenge, for if 100 devices are sent to policyholders, a little more than half will get installed in vehicle OBDII ports, without some form of encouragement – Customer care support, emails etc.

While self installing devices are the most cost effective ways to implement an OBDII-based UBI program today, consideration should be given to involving brokers and/or third parties in the process. The thinking about getting brokers involved is to help increase both the touch points that a broker has with the policyholder, and to use the broker network to help the end users.
Third parties are not generally involved in the United States but there is no reason why an insurance company in Canada could change the convention and use a “Smart courier” to ship and install the product in the policyholder’s vehicle.

B. Conclusion

Today’s Telematics Service Providers are adept at providing a complete end-to-end solution for Usage based insurance. Over the past year this solution has contained analytics. But current solutions now contain marketing advice to help accelerate the consumer demand for UBI. IMS offers Marketing Support as part of our complete solution.

It’s worth a chat.

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