Consumers’ UBI Privacy Concerns Take Back Seat to Safety Needs

In last Tuesday’s blog we told you that 1 in 3 consumers are interested in usage based insurance.

Today we’re discussing their concerns about consumer data privacy. How many people are wary about privacy? How could these concerns affect your usage based insurance rollout? What can your company do to alleviate privacy concerns and earn usage based insurance business?

Again, we turn to 2014 LexisNexis research for answers to these questions. The company’s findings, compiled from 2,000 respondents, reveal some interesting insights about the future of usage based insurance.

For example, the report predicts that 20 to 30 percent of the insurance market will be captured by usage based insurance within the next five years. And, data indicates that consumers like the idea of insurance controlling costs through safe driving habits. Up 12 percent from 2013, parents are more interested than ever in tracking their teens’ whereabouts and knowing how well their kids are driving. Almost half (45%) of the respondents expressed interest in using UBI data to track the driving habits of family members.

It appears that the high priority of safety may move the privacy issue to a back seat. In other words, consumers may be willing to give up some information in exchange for the opportunity to help themselves and their teen drivers avoid accidents.

While many consumers take issue with giving information to their auto insurance carriers, an equal number are as comfortable with the data exchange as they are with social media. In particular, younger drivers are more accustomed to trading personal data privacy to gain the benefits of technology.

The history of online banking reminds us that consumers will be wary and voice concerns over privacy but convenience and value added services will win out in the long run. Likewise, as consumers become more familiar with usage based insurance, they will acclimate to the data tracking aspect of the product. Case in point: Only 68 percent of consumers in 2014 feel that usage based insurance provides too much information to insurance companies, compared to 72 percent in 2010.

For consumers who are still hesitant around the issue of privacy, insurers can offer value-added services to emphasize the safety benefits of data collection. Providing emergency response and roadside assistance services along with stolen vehicle tracking and recovery are solid counter measures to consumer reluctance. Focusing on teen safety and accident reduction through coaching is also a smart strategy.

Clear communication about the type of data collected is also important. For example, some consumers believe that insurers would be able to tell if they’d been drinking and driving in a UBI program. Of course, insurers can’t detect drinking and driving with smartphone UBI, but nevertheless, it is a concern that needs to be addressed with clear and proactive communication.

Our conclusion: Privacy is still a potential barrier to consumer adoption of usage based insurance, particularly with older audiences. That said, it’s not a formidable barrier. With increased awareness, education and focus on the safety upsides of data sharing, privacy issues will take a back seat. The most important thing that auto insurers can do is to start planning UBI program rollouts, and communicating coming options to policyholders now.  The grass is always greener, and policyholders won’t stay with you just because they’re satisfied with your service. Use UBI as a tool to build the relationship and earn their loyalty.

We have limited UBI pilot programs available. Let us know if you’d like to be considered.