How Auto Insurers Can Capture the Booming Senior Market with UBI
Mileage and claims. There’s a big correlation between the two, as any insurer knows. Yet the standard pricing model barely distinguishes between drivers who log only 5,000 miles a year and those who log 20,000, said Becky Yerak of the Chicago Tribune.
That’s a problem for anyone who drivers fewer miles than most – particularly seniors.
Older drivers … a menace behind the wheel? Not so much.
It’s not uncommon to imagine seniors as a menace behind the wheel, but the numbers don’t necessarily support that bad rap. As pointed out in our last article, studies have shown that senior drivers have fewer crashes and are less likely to be injured or killed than middle-aged drivers ages 35-54, because:
1) Seniors drive less often and for shorter distances
2) Seniors tend to avoid inclement weather conditions and night driving
3) Seniors tend to self-limit their driving if they experience limitations in their health or vision
4) Seniors are the most experienced drivers, making them safer on the road than younger drivers
Sometimes insurers offer seniors an age-based discount. But we think they can do better.
We think seniors deserve premiums that are based on their safety records.
When the Consumer Federation of America shopped insurance for a hypothetical 30-year-old woman, they found that astonishingly, Farmers, Progressive and Allstate offered her the same annual premium whether she drove 5,000 or 20,000 miles a year.
Compare that to usage based insurance pricing, which rewards low-mileage drivers with what can amount to “hefty” discounts, said Mark Williams, a Columbus Dispatch contributor. While “most participants will see discounts of 10 to 15 percent,” those who drive relatively little could save 30 percent, even as much as 50 percent.
That’s great news for seniors, who, according to the Federal Highway Administration, drive an annual average of only 7,646 miles.
Offer a more competitive package to an ever-expanding customer base.
It’s no secret that the elder population is growing. The “90-and-older population nearly tripled” since 1980, “reaching 1.9 million in 2010,” said the U.S. Census Bureau. By 2030, we expect over 57 million to celebrate their 70th birthday, adding up to “30 percent more drivers aged 70 and older on our roadways.”
Insurers offering UBI-based discounts can give this customer base a much more competitive premium than those using the standard pricing model. It’s only a matter of time before the older population takes it for granted that UBI is simply a better deal, given their needs.
Bottom line, with usage based insurance you can position yourself to make a much better offer to a market whose numbers are constantly on the rise. Reward older drivers for their low annual mileage, and tap into a demographic whose track record is among the best.