While a number of insurers ponder if and when to enter the Usage Based Insurance (UBI) marketplace using Telematics, other insurers are transitioning to Telematics Version 2 which include features and benefits to attract a wider audience and, perhaps, retain the initial UBI customer base converts, and improve overall profitability.
Our question to you: Are these factors enough of a business case, or are we missing something?
Getting More and Better Drivers
In the US, Allstate recently announced that it was expanding its ‘Drivewise’ UBI program to an additional 6 states beyond the initial 10. At the same time, the company has launched a smartphone app which helps the insured or prospect estimate the impact of his/her driving habits on the premium. According to Allstate’s Senior Product Vice President Ed Biemer, “This provides our customers a method to quickly identify ways to improve their driving and, at the same time, be rewarded for safe driving habits.”
The driver improvement model was pioneered in some respects in Canada with the Industrial Alliance implementation of the Mobiliz program (see our post in November last year). Industrial Alliance was recently honoured by Celent with a Model Insurer award for this program.
Price Is Not The Only Object
Discounting need not be the only telematics tool to attract cusotmers. In its Insurance Telematics Report 2013, UK Based Telematics Update noted that some customers “are not particularly price-sensitive, while others fall into risk categories that will not allow them to realize significant savings compared with their rating under traditional methodologies.”
The trick is to use the telematics data to develop additional value add services. The report cites Towers Watson research which found several services attractive to consumers: vehicle tracking, emergency services, and emergency alerts. Telematics Update notes that discovering such services are important even for price sensitive consumers as the playing field becomes more crowded and competitive.
Next Targets: Retention and Risk Selection
The Telematics Update report notes that the jury is still out on the exact impact of Value Add Services (vs Discounting) on attracting new customers. However, it does cite Paul Stacy, of Telematics Supplier Wunelli, as saying that Value Add services may be significant in customer retention.
Continued improvement in Telematics on both personal lines and commercial lines accounts should offer opportunities for insurers to become more targeted in risk selection as well as underwriting. This should provide opportunities for insurers to improve profitability as well as hitting growth targets.
So What’s Missing?
If we read this right, there are some very compelling reasons for insurers to get into Telematics. However, some are still holding back.
We’d like your thoughts. Ar we just seeing the good road ahead and missing the potholes just in front of the car?
Let us know what you think.