How UBI is changing Auto Insurance
Thanks to innovative Usage-based Insurance (UBI) technologies, a revolution is happening in the way auto insurance is being calculated. Today, it’s easy to record and analyze a driver’s behavior while they are behind the wheel. Given that the average American spends approximately eight hours a week in their car, there is a potential goldmine of telematics information that will allow insurers to accurately predict risk and subsequently offer auto insurance products based on actual driving practices.
Using telematics, it is possible to see how people drive, from a detailed data perspective. Companies like Earnix have taken it a step further and have included the most advanced AI tech into the mix – making it possible to detect risk factors like distraction, behavior, exposure, and context.
While one might think people would object to having their driving habits tracked, the opposite is true – 65% of participants in a 2020 survey said they would willingly share driving data with their insurance provider if it could result in more favorably priced auto insurance. As indeed it could – using UBI, insurers can reward “good” drivers with discounts on their insurance and still cover their bases through the precise and accurate assessments of riskier drivers.
Telematics Insurance is a Win-Win Situation
With the likes of Netflix, Amazon and Uber offering instant gratification and personalized services, 21st Century consumers have grown to expect this level of service from every consumer touchpoint in their lives. Insurance is no different, yet it has been more of a challenge for legacy insurance companies to figure out a way to offer a truly personalized experience that keeps them profitable while meeting consumer needs and scaling – all at the same time.
Telematics data that is natively integrated into an end-to-end pricing and rating platform, supporting usage-based insurance (UBI) policies is the missing puzzle piece. With telematics, insurers can build models based on highly accurate data, saving money on expenses, and increasing profit by accurately aligning pricing with risk and offering add-ons based on customer needs. At the same time, they can give consumers the uniquely personalized experience they demand, building the loyalty and satisfaction that generates long-term value.
From an operational perspective, telematics is a win for insurers. For consumers, the win is the personalized UBI insurance policy they receive. Both parties benefit from the real-time data and a dynamic process with pricing that can change as needs and habits continuously change.
Operationalizing UBI Insurance
The demand for UBI insurance is expected to increase by 140 million subscribers in the near future. It’s not that insurance companies don’t want to address this market need, but challenges abound. Building usage-based insurance programs require analyzing huge amounts of data – existing processes tend to be manual, time-consuming, and imprecise. Relying on unstructured data runs the risk of inaccurate rates, and there’s also the hassle of providing retroactive rebates if the actual usage doesn’t match up with what was expected. Without the right technology for executing and implementing comprehensive UBI products, insurers often face unfavorable and unprofitable situations.
A strong telematics solution seamlessly integrated into a powerful managed cloud platform like the one Earnix provides, however, is the trick to allowing insurance companies to seamlessly and efficiently create personalized UBI products. An end-to-end platform means integrating new driving-specific information with existing risk data to build new, error-free risk models specifically designed for UBI. The fully automated process saves time and upgrades the ability to evaluate and define risk profiles with precision.
A streamlined and efficient operational process has greater potential to be profitable by definition. Combine that with an auto insurance product that is exactly what consumers want…it should be a no-brainer that this is where the insurance industry is headed.
Utilizing Telematics Insurance for Personalization
Older telematics insurance systems required hardware to be placed inside or attached to the car, but this has now changed. With app-based UBI telematics, all that’s needed for the insurance company to receive a steady stream of driving data is the presence of an installed app on the driver’s cell phone, in the vehicle. As 85% of Americans own a smartphone, all they have to do is remember to bring it with them in the car. The app can then automatically sense when to start monitoring relevant activity and begin sharing information.
The extent of the personalization provided depends on the plans the insurer chooses to offer. One of the most common UBI telematics plans includes “Pay as You Drive” which is based solely on mileage and time driven. Another is “Pay How You Drive” which requires tracking braking, cornering, speeding, and distraction levels. The more parameters accessible to the insurer, the more accurate and personalized the risk profiles – and therefore pricing – can be.
Capitalizing on Real-Time Data for Dynamic UBI Pricing
Today’s consumers are less interested in merely transacting with their service providers, but rather want to have a relationship. They want to feel seen as a person and not just a number on a balance sheet. Relationships are dynamic, with changing needs as circumstances change. A UBI solution that collects real-time telematics data means both the consumer and the insurance company can benefit from changes on the fly, as circumstances demand.
Bottom line, with an effective data-rich UBI solution, insurers can make sure that drivers not only get the best plan that addresses their specific risk profile, but also get it at the right time. For example, a driver may purchase insurance that is only valid in their home state (especially now as people are traveling so much less). If that driver does end up driving across state lines, the UBI solution will receive that data and alert the insurance provider who can then send the customer a real-time offer. You can’t get more timely, relevant, and personalized than that!
Along the same lines, if the insurance company sees that a previously safe driver begins to exhibit unsafe behavior, they can immediately adjust the pricing to reflect the increased risk. Access to real-time data protects the insurance company’s profitability just as much as it allows the consumer to get personalized offers.
Earnix Simplifies UBI
With Earnix’s end-to-end platform that now includes a fully integrated state-of-the-art telematics app, it’s easy for insurers to quickly launch compelling usage-based insurance policies
This game-changing solution allows insurers to cover everything from tracking, to rating, to pricing, to deployment, all in one single platform. With Earnix’s UBI solution, everyone wins. Customers are happy with their “just for me ” personalized insurance, insurance companies are delighted by highly accurate risk modeling, unlocking additional revenue streams and greater customer loyalty – that is the result of offering tailor-made pricing plans, and everyone benefits from safer roads due to better driving habits.
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