I detected a noticeable change in tone at the Insurance Telematics USA conference held in Chicago last week. In prior years, much of the discussion was prognosis and guesstimation. This year, the majority of presentations and conversations dealt with real-world issues relating to development, implementation, promotion, and utilization of telematics-based usage-based insurance (UBI).
I think this portends a solid future for UBI in Canada as well at the US. Here are a few examples, including my own personal experience.
Not if, but when and where …
As in the past, the kick-off keynote was presented by Robin Harbage, Director at Towers Watson. Harbage noted that there has been a shift in attitudes by US consumers; with 52% of consumers interested in UBI, and another 27% who may be interested. This could double the uptake in UBI from 4% to 8% sometime in the next 18 months.
According to Harbage,The primary concerns by consumers are:
- Possibility of premium increases in future 48%
- Privacy 39%
- Denial of claims (based on telematics data 33%
Harbage noted that proxy implementations will continue, as most insurers will not invest heavily in big data infrastructures before some proof of concept. However, Harbage recommends insurers to move from proxies, increasing the granularity of the data used and adding contextual information, such as road conditions, weather, etc. Failure to do so reduces the value of the UBI program as a strategic predictive modelling tool.
Not why, but how and who …
Progressive Insurance continues to be the recognized UBI leader in the US. David Pratt, Progressive’s General Manager of UBI, focused on Progessive’s evolving marketing strategy, outlining the data-driven campaigns the company has used to drive uptake.
The first phase was simple awareness of the program, ‘Snapshot’, using Flo, the popular Progressive spokeswoman, who stressed the benefits of good driving, and the simplicity of installing the device. (This blog noted the theme in an August 2012 post.) Phase two was more direct, challenging good drivers to test drive the product.
For phase three, Pratt noted that consumers had expressed concern that poor drivers were forcing increased premiums for everyone, regardless of driving behaviour. As a result, Progressive changed the tone of the ads, showing Snapshot as a cure for ‘Rate Suckers’ (bad drivers portrayed a leaches sticking to the windshields of good drivers’ cars).
Pratt gave the audience a preview of some of phase four material, coming out this month. To address interest expressed by customers, Progressive describes what the Snapshot device does, using cartoon character to emulate the device, riding around in the car as a companion.
Pratt was careful to point out that its marketing/advertising is data driven, and encompasses all media. In addition, it focuses on training for its employees and its agency force to ensure that there is consistent representation of its products.
Progressive’s track record now includes $2 billion in Snapshot driven premium and 11 billion recorded passenger miles, which is used to refine the rating algorithms. Pratt noted that their big data structure will allow for addition of variables in future as experience evolves.
Consumer Rights and Data Portability
I had the privilege of moderating a panel of practitioners discussing impacts of consumer rights and data portability have on UBI adoption. Panel members were:
- Chris Carver, president ATG Risk Solutions, which is developing a secure clearinghouse for commercial UBI data,
- Gail Gottehrer, partner at the law firm Axinn, Veltrop & Harkrider LLP, and
- Shobanaa Sankaran, Business Development Consultant at California Casualty Management Company, an insurer focusing on public service employees.
The panel noted that common standardized scoring data will promote efficiency and effectiveness, and can protect privacy of data for consumers as well as propriety of algorithms for insurers. However, there could be challenging side effects. For example, as the penetration of UBI expands, drivers who elect not to utilize telematics based UBI may find that insurers are less interested in the business. This could result in digital ‘redlining’, if carried to an extreme.
Canadian Content
I was very pleased to see participation at the event by Canadian insurers and Canadian-headquartered suppliers, including IMS, Baseline Telematics, and IMETRIK. In addition, a number of participants are actively following developments with the IBAO IBRI initiative.
What do you think?
My sense is that telematics based UBI is now entrenched with the US insurance market, and that this will further encourage Canadian initiatives. Does this make sense to you?
Patrick,
Thanks for this summary.
Your observations are correct in that our activity in the US is accelerating quickly and Canada is awakening to the momentum. We’re seeing new players enter the space (both very large Tier 1s and some new Tier 2) in the US.
Much of this is due to solving and in some cases removing the barriers to growth including the business model, consumer adoption (as the Towers Watson presentation indicated), learning how to deal with the data, fewer patent issues, some regulatory changes and more senior management buy-in.
Blair
100% agree with Patrick and Blair. Additional drivers which will accelerate the telematics adoption and deployment curve in both countries – and much sooner than most understand – include more aggressive OE participation plus cross-pollination from fleet telematics vendors who have years of experience designing and developing commercial fleet solutions who will now partner with P&C UBI program vendors and carriers themselves to seek their share of the commercial – and eventually the personal lines – opportunities. And agents and brokers also now understand that UBI and telematics is a powerful tool with which to engage and market consumers. Finally, with gamification, driver safety, collision avoidance, driver behaviour modification and other truly disruptive use cases emerging, fence-sitters and early adopters alike now understand the much larger,longer-term potential rewards of leveraging telematics effectively and the need to get in the game – sooner than later. As the saying goes, “if you are not moving forward, at some point you are moving backwards”.