The Insurance Telematics Disruption: How to Survive the Big One

insurance-telematicsIt’s coming. Experts have studied it. The question isn’t if, but when.

We’re not talking about a major natural disaster that may or may not occur sometime in the future. No, we’re talking about a change that’s making waves right now – the insurance telematics disruption known as UBI.

Already, usage based insurance is changing the industry landscape. “Most of the top 10 auto insurers have UBI programs,” Insurance Journal said. “According to Progressive, more than 1.6 million drivers have signed on to use its Snapshot product since 2008.”

But a big wave is only trouble for those who aren’t prepared to ride it. Here are three tips to help you survive the big one.

1. Understand the magnitude of the disruption. Just as experts study timelines, plates and magnitude to assess the impact of a coming quake, insurers must evaluate just how intense the telematics disruption is going to be. “IoT has only started to affect P&C insurance, but the situation is rapidly changing,” Property Casualty 360 contributors said last month. “A recent Strategy Meets Action study reveals that nearly a quarter of insurers are in some phase of IoT deployment. Broad scale IoT deployment such as usage based insurance (UBI) and other telematics solutions imply limitations to premium growth as discounts proliferate.”

Case in point: Snapshot users have increased from 20 to 35 percent in just two years. This isn’t an isolated incident. It’s an industry-wide transformation. As Strategy Meets Action put it, “Any company with a stake in the personal auto insurance business must recognize that usage based insurance (UBI) is a market disrupting force that will have a major impact over the next 10 years.”

2. Identify how imminent the disruption is. “To prepare your response and time your move, it’s key to estimate when these events will affect you,” Nicholas Evans, contributor to ComputerWorld, said in an article on technological disruption. “Is this something you need to act on immediately or something you should continue to monitor closely? Either way, it’s good to have a strategic plan and weigh all the response scenarios.”

Again based on SMA research, Insurance Journal summarized that “70 percent of North American property/casualty insurers are operating or planning UBI programs, and 75 percent believe UBI will ‘fundamentally alter the auto insurance industry between now and 2020.” That’s a mere five years away. Long enough to roll out smart, strategic changes. Not long enough to dawdle.

3. Build a survival plan you can count on. Preparing for a physical quake involves a range of preparations, from the simple (like bolting down your bookshelves) to the strategic (like making seismic upgrades to a structure). The same goes for industry disruptions. In the case of insurance telematics, the action plan is straightforward. It’s time to make usage based insurance one of your core offerings.

Wondering if you should go with smartphone UBI or OBD-based UBI? Our comparison chart helps break down the differences. Get it here.

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