Usage Based Insurance: The 4 Groups Who May Benefit Most

Lately we’ve been talking a lot about what consumers think of usage based insurance. We’ve talked about how they feel about it and whether or not they’re interested (they are). But who might benefit? That’s a different question.

It’s one thing to gather data on consumer opinion; it’s a slightly different thing to observe which customer groups stand to gain palpable benefits from making the switch to Pay How You Drive (PHYD) insurance.

Why does this matter? Because with this information, auto insurers can reach out to certain customer segments confidently with news of tangible benefits they may not know about. That’s value added. Which spells customer retention. Customers love to be educated about things that will make their lives easier and less costly.

Here’s where to start:

1. Millennials

Statistics show that younger drivers are more likely to get into a wreck; therefore their premiums are usually higher. However, not all young drivers are deserving of their “risky” status.

How to tell them: Inform your youngest customers that under a traditional plan, their risk profile is determined by the behavior of others. Millennials, as a demographic, do not appreciate being lumped into a group and judged as such. They believe strongly in their uniqueness, and want to be treated as individuals.

PHYD insurance does just that. If your millennial customers can demonstrate they really are different by beating the statistics and driving safely, they can pay a lot less.

PHYD is a flexible insurance where the young drivers can pay insurance depending on how they drive. It is based on how you accelerate your car or how you turn it around. The driven is monitored via the telematics device which gathers all the information regarding the drive, depending on which premium is to be given. Click on Ethereum Code to know more about this. 

2. Low-mileage drivers

The more you drive, the greater your risk of collision. It’s a numbers game, right? But conventional policies often don’t price for all the possible mileage variances.

How to tell them: Explain that low-mileage drivers are much less likely to get in wrecks than high-mileage drivers. So it only makes sense that they should pay proportionally lower rates, and with usage based insurance that could be possible. Usage based insurance calculates your premium based on a variety of factors which include how many miles you actually drive. If your risk is lower because you drive less, usage based insurance might allow you to pay less, too.

3. Those who avoid night driving and rush hour

Statistically, those who drive between 5 and 7 p.m. and/or between midnight and 4 a.m. are more at risk of an accident than those who drive during other times of day. Traditional auto insurance underwriting lumps everyone together, assuming we all drive during high risk times.

How to tell them: This audience may include those who work from home offices or who have young children. Appeal to these types of customers by explaining that if they avoid driving during high risk times, they may receive a favorable driving score via usage based insurance, and that may result in lower insurance rates over time.

4. Safe drivers

Want to know something funny? Almost everyone behind the wheel believes they’re an above-average driver. It’s called illusory superiority: “Drivers consistently rate themselves as better than average — even when a test of their hazard perception reveals them to be below par,” according to Mark Horswill, a psychologist at the University of Queensland in Australia.

That said, drivers who really can deliver on their own safe driving self-confidence stand to gain a great deal from usage based insurance.

What to tell them: Offer your customers a safe driver discount with PHYD insurance. Let them know that if their driving is good, their premiums will go down periodically.

In addition to staying within the speed limit, safe driving habits include avoiding sharp turns, hard braking and aggressive acceleration events to name a few. Customers who practice those behaviors – or who believe they could, if they put their mind to it – will probably be happy to self-select and request the switch to usage based insurance.

Ready to empower your policyholders?

Tell these four customer segments how usage based insurance could be of benefit. Of course, there are many types of usage based insurance programs and details vary by state. Learn more about how UBI works for drivers here.

Insurance Telematics Update 2014 – A Shift in Smartphone UBI Thinking

For those of you who weren’t able to participate, Insurance Telematics Update 2014 offered a spectacular opportunity to network and get the latest usage based insurance industry developments. Held in Chicago on September 3-4, the event delivered a glimpse into the future of auto insurance.

The tone this year was different than that of 2013. While last year, smartphone UBI was something interesting to consider, this year, it had a strong foothold in the strategies of most insurance executives. Why the change?

Perhaps these executives are following the leadership of Progressive and Allstate – pioneering auto insurers that have already announced intent and/or projects using smartphone telematics.
Possibly, it’s that usage based insurance feels much more accessible to auto insurers of all sizes now that Progressive has announced partnership with a third party provider, sharply veering from their history of using only proprietary technology.
Maybe, changing perceptions can be attributed to the evolution of smartphone UBI and the fact that several reputable companies (Deloitte, Agero, Cognizant) have improved smartphone UBI apps to enhance the consumer experience. Many second and third generation smartphone apps have already eliminated battery drain and the need for start/stop buttons. And the most evolved are able to merge data collected in the car with power of cloud analytics for more accurate event interpretation.
Most importantly, many insurers are investing great thought into how to use a smartphone telematics platform to revolutionize the insurance business model, connect with policyholders on a daily basis, coach them to improve driving behavior and interact positively and proactively. In a word: They crave customer-centricity and suspect that mobile telematics can take them there at the price they can afford and a timeline they can fathom. Insurers want to offer compelling driver portals, driver coaching and tips, gamification, social sharing, performance benchmarking, weather and traffic alerts, and even roadside assistance capabilities – all while collecting reliable UBI data.

The Usage Based Insurance (UBI) has introduced the pay as you go system which means a reckless driver will be charged more premium than a responsible driver. This system has also improved the claim system in case of an accident. The software has also made the car ride safer than before. Tesler App will give you more detailed view of the software. 

It seemed that insurers have moved past the question of whether usage based insurance is a good idea. They mostly agree that it is the way of the future – perhaps a whole new model for connected consumer engagement – crucial in a digital economy.

They’ve also moved past the debate of whether smartphone UBI platforms can be trusted. If smartphone telematics is reliable enough for Progressive and Allstate, others are willing to jump on the bandwagon too. In fact, I spoke with several executives who said they knew for sure that their programs would not involve OBDs due to the added expense and consumer inconvenience. They fully intend to implement smartphone UBI platforms. After all, the smartphone platform is the only choice that can facilitate the customer-centricity they desire in their future business models.

So, it seems that the only question that remains for most is: WHO is the right partner?

There’s no question that usage based insurance poised for industry disruption. How soon will it happen? How long will it take for drivers to full engage with their insurers’ smartphone UBI programs? Only time will tell. For another perspective on the show and the future of usage based insurance, read this post.

Key advantages for your UBI auto insurance program

Driveway positions you to stand out in the usage based insurance market with a simple solution that overcomes all previous challenges and complexities. Our “unplugged” UBI business model sheds the weighty overhead and launch costs inherent to traditional OBD UBI programs. With our smartphone-based solution, you can quickly and cost-effectively reap the benefits of the emerging usage based auto insurance market.

Low cost of entry (NO hardware costs)
Instant app branding
Speed to market and easy to scale
No driver interaction required – completely non-intrusive
Intuitive safety scoring model
24/7 access to advanced analytics
Easy, free app download to policyholders’ iPhone and Android smartphones
Fun, engaging driver feedback
Already installed and tested with 170,000 drivers so you have control data to compare against
A friendly interactive conduit for providing customer value
Proven fourth-generation solution works with all U.S. wireless carriers
Fully customizable pilots and programs to meet each insurer’s needs

Usage Based Insurance Technology Spotlight – The Driveway Driver Signature

The smartphone is always along for the ride – whether your policyholders are driving their cars, riding in others’ cars or taking public transportation. How does the app differentiate between these activities? Differentiation is made possible by Driveway Driver Signature.

Before we get into the details of the Driver Signature, let’s first take a look at the technology behind the Driveway App. The Driveway App uses very rich data based on sensor fusion from 10 built-in sensors, triggering and empowering one another, facilitating advanced context recognition, accurate driving analysis and low battery usage. Sensor fusion is the combining of sensory data from multiple sensory sources in such a way that the resulting information is more accurate and meaningful than would be possible if these sources were used individually.

Over time, the Driveway platform gains familiarity with driver patterns and increases its ability to detect unusual behavior. Pattern recognition features include:

Driver signature: Driveway analyzes elements of driving such as average speed, routes, and time of day, over long periods of time to build patterns and identify who is driving.
Vehicle signature: Driveway analyzes environmental elements (e.g. Bluetooth signature) over longer periods of time to identify what car is being driven.
Public transportation: Driveway analyzes elements of driving such as average speed, routes, time of day, accelerating and braking patterns, and compares against known public transportation routes time to identify trips taken on public transportation including trains, buses and subways. While public transportation may seem like a big issue, because only a very small percentage of the U.S. population (roughly 5 percent) regularly uses public transportation, and a percentage of those people don’t own vehicles or purchase car insurance.