Dip A Toe into the IoT with Usage Based Insurance

usage based insuranceThe Internet of Things is a rapid, widespread shift in technology that’s taking the world by storm. It’s the force that’s making a modern-day reality of the futuristic world – a world we used to only see in the movies.

  • Smart houses that turn on the lights and heat before you arrive home …
  • Shoes that tell first-responders where exactly where you’ve fallen …
  • Cars that parallel-park themselves …
  • Usage based insurance apps that can detect an odometer reading …

So what does this have to do with insurance?

If you’ve read some recent industry articles, you may believe that insurers are slow to catch on to the storm of changes brewing in the IoT. After all, when a worldwide trend is developing this fast, insurers can’t afford to get caught napping, as Insurance Networking News inferred last week. In the Nov. 5 article, author Lenny Liebmann says,

“Despite the proven value of vehicle telemetry in supporting usage-based insurance (UBI) offerings for car owners, the insurance industry is taking a wait-and-see attitude towards the broader Internet of Things (IoT). Their attitude means that it may be years before most insurers gain the ability to capture, analyze and integrate IoT into their pricing, underwriting and claims operations.”

The Insurance Networking News article was partially based on a recent report by Celent. When Celent asked a panel of insurance CIOs how C-suite management views the Internet of Things, 11 percent of small insurers and 25 percent of mid-size insurers replied that it would substantially change how they do business. None of large insurers felt the IoT would substantially change their business models. Many who were interviewed felt that it was simply too soon to tell. The report concludes that insurers are largely in a “watchful waiting mode,” with usage based insurance being one notable exception.

There’s a good reason that usage based insurance is the exception!

Starting a usage based insurance program is equivalent to dipping your toe into IoT waters. And dipping your toe is important for informed decision making. Those of us who work in insurance know that insurers aren’t napping, but they are cautious, and rightfully so – as they’re often the ones left paying for brash decisions.

Fortunately, usage based insurance isn’t an all or nothing proposition, particularly when compared to the unprecedented task of underwriting insurance for a driverless car. With usage based insurance, insurers can ease their way into program rollouts by starting slow, implementing a small self-selection discount, and keeping filings simple. If filings are based on a small self-selection discount, loss data and scoring models most likely won’t be needed to get started. Read more about our “feed the UBI elephant strategy” here.

American education reformer, Horace Mann once said: “Let us not be content to wait and see what will happen, but give us the determination to make the right things happen.” No – the insurance industry isn’t napping – it’s contemplating and strategizing.  By dipping a toe, testing the waters and making informed decisions, it can make the right things happen.

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

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