Debunking the “Disinterested” Usage Based Insurance Myth
Over the past couple of weeks, I’ve seen a few articles in the news saying that half of Americans aren’t interested in usage based insurance. They seem to be inferring that the usage based insurance trend is losing demand. Really?
This conclusion struck me as a little premature. First, I think we can all agree that most consumers don’t even know what usage based insurance is yet. The technology is in its infancy, with most carriers not even offering it yet. Is it possible that consumers are losing interest … before most even had interest?
Before we jump to conclusions, let’s take a moment to dissect the facts:
Half empty vs. half full. Just last week, we ran an article and an infographic highlighting a 2014 LexisNexis study that concluded that one in three consumers are interested in mobile usage based insurance. I personally felt that interest from one in three consumers was great, especially considering that a lot of consumers don’t really understand UBI yet. I guess you could say my glass was a third full.
The new study from Insurancequotes.com concludes that 49 percent of consumers would not consider usage based insurance. Maybe their glass is half empty? Flipping those numbers, and considering the margin of error in any survey, you could easily say that roughly half of consumers would consider usage based insurance. And that’s a number worth noting.
Risk vs. return. With all products and services, there is a pro and con. For example, the pro of buying a new $350 ski jacket is that you’ll be warm through the winter. The con? You won’t have $350 anymore. A person’s likelihood of buying a $350 ski jacket entirely depends on circumstances. For example, if I ask a Texan, “How likely are you to buy a $350 ski jacket?” she will probably say “not likely.” However, if she was planning a trip to Colorado in two weeks, her answer would probably change.
Now let’s apply this elementary logic to usage based insurance. If you ask consumers if they would consider purchasing usage based insurance, obviously, there’s a downside. They have to give up some degree of privacy. Again, the likelihood of adoption depends entirely on the circumstances – specifically the strength of the upside. The LexisNexis study we highlighted last week, found a positive correlation between the degree of discount offered and consumers’ degree of interest. When the discount level was increased from 5 to 15 percent, consumer interest doubled!
Awareness vs. interest. Finally, anyone who has any experience in marketing knows that before you can get to interest, you have to cross the awareness hurdle – something the usage based insurance segment hasn’t even tackled yet. The insurancequotes.com report cites privacy as a major UBI barrier among older consumers, and goes on to say that many believe their insurers will be able to tell if they’ve been drinking and driving. Anyone detect an awareness issue?
The bottom line: Take a close look at the numbers, and I’m sure you’ll agree … it’s way too early to say that interest in usage based insurance is declining. In fact, interest may be increasing. When all the facts are on the table, and consumers clearly understand exactly what UBI programs monitor, how much UBI programs cost, and how UBI might translate to increased safety, fewer accidents and lower rates, then we can talk.
Want to know more about how usage based insurance can work for your company? Watch the video below.