A NEW PATH FOR US­AGE-BASED IN­SURANCE

Digital Insurance - - INNOVATION | TELEMATICS - BY NATHAN GO­LIA

Af­ter a muted year for growth in us­age-based auto in­surance pro­grams, sev­eral car­ri­ers are rolling out new or re­worked ver­sions of their ini­tia­tives to take ad­van­tage of con­sumers’ own smart­phones or con­nected cars to col­lect the needed data.

For the first decade of its ex­is­tence, us­age-based in­surance (UBI) was pow­ered by third-party telem­at­ics de­vices that in­surance com­pa­nies pro­vided to cus­tomers for in­stal­la­tion in their ve­hi­cles, most com­monly in the OBD-2 port. Now, with telem­at­ics tech­nol­ogy is em­bed­ded in new cars and new mo­bile phones com­ing stan­dard with GPS, ac­celerom­e­ter and mo­bile broad­band tech­nol­ogy, that’s less im­por­tant.

“Peo­ple are mov­ing away from OBD-2-based de­vices to think­ing about how they bet­ter dig­i­tally con­nect to their cus­tomers,” says David Bassi, ex­ec­u­tive di­rec­tor for EY. “They’re look­ing at those alternative meth­ods for col­lect­ing the data they need, and how they col­lect a fuller range of data.”

This new wave of UBI prod­ucts rolling out also al­lows the mech­a­nism for col­lect­ing the data car­ri­ers need to serve as a feed­back and in­ter­ac­tion point with their cus­tomers, cre­at­ing a bet­ter cus­tomer ex­pe­ri­ence . While third-party tech­nol­ogy isn’t com­pletely out of the pic­ture, most in­sur­ers pre­fer the smart­phone-app ap­proach be­cause cus­tomers can more eas­ily vi­su­al­ize the ben­e­fits of the pro­gram, and are look­ing to build the best prod­uct pos­si­ble through that chan­nel.

For ex­am­ple, Amer­i­can Fam­ily rolled out its KnowYourDrive pro­gram ear­lier this year in two states. The new pro­gram com­bines a don­gle with a smart­phone app, both of which are man­u­fac­tured by con­nected-car com­pany Au­to­matic. As a re­sult, an OBD-2-only pro­gram that the com­pany has had in pro­duc­tion since 2013 is be­ing sun­set­ted.

“The in­dus­try has rec­og­nized that the smart­phone has be­come ubiq­ui­tous and has the ca­pac­ity to de­liver just about any­thing through an app,” says Kelly Lien, VP of prod­uct man­age­ment for per­sonal lines at Amer­i­can Fam­ily.

In ad­di­tion to col­lect­ing the data that pow­ers the pro­gram, the Au­to­matic app “pro­vides in­for­ma­tion about driv­ing habits, and can re­turn tips and ad­vice on how to im­prove driv­ing,” he adds. “We’re ex­cited to es­tab­lish a deeper con­nec­tion with the cus­tomer and al­low them to earn a dis­count.”

But it’s not just the tier-one in­sur­ers find­ing part­ners for new UBI pro­grams. Many star­tups, have emerged in the midst of the in­surtech ex­plo­sion with white-la­bel pro­grams for us­age-based in­surance that car­ri­ers of all sizes can adopt.

For ex­am­ple, Elec­tric In­surance pi­loted a fully mo­bile-based UBI pro­gram, us­ing tech­nol­ogy from the in­surtech Cam­bridge Mo­bile Telem­at­ics (CMT), in Ohio last year. The suc­cess­ful pi­lot is lead­ing the com­pany to ex­pand avail­abil­ity to four more states on March 1: Texas, Ge­or­gia, Con­necti­cut, and Wis­con­sin.

“We’ve been track­ing and mon­i­tor­ing [UBI] pretty closely for a num­ber of years, and the avail­abil­ity and ac­cu­racy of the smart­phone data made it pos­si­ble for us to be part of the space,” says Mike Mucher, VP of sales and mar­ket­ing for Elec­tric.

Mucher says that in its Ohio pi­lot, Elec­tric was fo­cused on get­ting feed­back on the user ex­pe­ri­ence, re­view­ing all the touch­points that it had with cus­tomers to see what worked and what didn’t.

“Our prod­uct team strate­gi­cally felt it was im­por­tant to see how our cus­tomers re­acted to it as a feed­back de­vice, in terms of at­tempt­ing to make their lives safer,” he ex­plains. “Part­ner­ing with a team like CMT, we have smart peo­ple look­ing at the tech and think­ing about how to help cus­tomers solve a prob­lem.”

THE EVOLV­ING MAR­KET

UBI vet­er­ans agree that the mar­ket for the prod­uct is chang­ing as cus­tomers ex­pect less fric­tion in be­ing able to lever­age new of­fer­ings. Even Pro­gres­sive’s Snap­shot, one of the long­est con­tin­u­ously op­er­at­ing UBI pro­grams in ex­is­tence, is poised for tran­si­tion, says Dave Pratt, the in­surer’s GM of UBI. The com­pany launched a Snap­shot mo­bile app in four states in De­cem­ber, pro­vid­ing a new way for cus­tomers to get in­volved with the pro­gram and open­ing up a line of com­mu­ni­ca­tion with them. “We give new cus­tomers a choice at sign-up: Do they want to get an OBD plug-in de­vice or a mo­bile app to col­lect the data,” Pratt ex­plains.

In its ini­tial it­er­a­tion, the Snap­shot pro­gram was not meant for long-term con­nec­tions. A six-month sam­ple of driv­ing is used to de­ter­mine any changes to the cus­tomer’s rate, then usu­ally the OBD de­vice was re­moved un­less the in­sured wants to try for a bet­ter score.

But Pro­gres­sive sees the op­por­tu­nity for ex­panded use cases as­so­ci­ated with the mo­bile ex­pe­ri­ence, that could keep them in con­tact with cus­tomers over a longer term. For ex­am­ple, if the app is run­ning and some­one uses the phone while driv­ing, a re­port at the end of the trip can il­lus­trate that for peo­ple in hopes of help­ing break the habit.

“I hope that we shift to a lot more peo­ple on mo­bile from the plug-in de­vices. It’s eas­ier for them and cheaper for us,” Pratt says. “We can be more nim­ble with the mo­bile app as well, since it’s so easy for peo­ple to up­date.”

In Canada, Des­jardins is in the mid­dle of a sim­i­lar tran­si­tion. Af­ter en­ter­ing the telem­at­ics realm with an OBD-2 de­vice in 2013, the com­pany is plan­ning to phase out that tech­nol­ogy in fa­vor of CMT’s mo­bile of­fer­ing for its Ajusto UBI prod­uct. “We’re also not go­ing to fo­cus on just the youth mar­ket,” says Alex Veilleux, VP of in­no­va­tion and strate­gic part­ner­ships for Des­jardins. “What we’re see­ing is that the pro­gram is fully in line with our nor­mal book of busi­ness based on age. For ex­am­ple, 32% of our Ajusto mem­bers are 50 and up, and it rep­re­sents in to­tal about 30% of our book of busi­ness.”

All of th­ese trends add up to a big op­por­tu­nity for in­sur­ers, Bassi con­cludes.

“I don’t think peo­ple are say­ing ‘We’re just go­ing to dab­ble,’” he says. “I think in­sur­ers are ready when they have an app that al­lows them to un­der­stand risk and cre­ate a bet­ter ex­pe­ri­ence for their cus­tomers.”

CON­NECTED CAR TECH­NOL­OGY IS MAK­ING US­AGE-BASED IN­SURANCE EAS­IER TO SELL

TELEM­AT­ICS DE­VICES LIKE PRO­GRES­SIVE’S ARE GIV­ING WAY TO SMART­PHONE APPS

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