Usage Based Insurance: The 4 Groups Who May Benefit Most
Lately we’ve been talking a lot about what consumers think of usage based insurance. We’ve talked about how they feel about it and whether or not they’re interested (they are). But who might benefit? That’s a different question.
It’s one thing to gather data on consumer opinion; it’s a slightly different thing to observe which customer groups stand to gain palpable benefits from making the switch to Pay How You Drive (PHYD) insurance.
Why does this matter? Because with this information, auto insurers can reach out to certain customer segments confidently with news of tangible benefits they may not know about. That’s value added. Which spells customer retention. Customers love to be educated about things that will make their lives easier and less costly.
Here’s where to start:
1. Millennials
Statistics show that younger drivers are more likely to get into a wreck; therefore their premiums are usually higher. However, not all young drivers are deserving of their “risky” status.
How to tell them: Inform your youngest customers that under a traditional plan, their risk profile is determined by the behavior of others. Millennials, as a demographic, do not appreciate being lumped into a group and judged as such. They believe strongly in their uniqueness, and want to be treated as individuals.
PHYD insurance does just that. If your millennial customers can demonstrate they really are different by beating the statistics and driving safely, they can pay a lot less.
2. Low-mileage drivers
The more you drive, the greater your risk of collision. It’s a numbers game, right? But conventional policies often don’t price for all the possible mileage variances.
How to tell them: Explain that low-mileage drivers are much less likely to get in wrecks than high-mileage drivers. So it only makes sense that they should pay proportionally lower rates, and with usage based insurance that could be possible. Usage based insurance calculates your premium based on a variety of factors which include how many miles you actually drive. If your risk is lower because you drive less, usage based insurance might allow you to pay less, too.
3. Those who avoid night driving and rush hour
Statistically, those who drive between 5 and 7 p.m. and/or between midnight and 4 a.m. are more at risk of an accident than those who drive during other times of day. Traditional auto insurance underwriting lumps everyone together, assuming we all drive during high risk times.
How to tell them: This audience may include those who work from home offices or who have young children. Appeal to these types of customers by explaining that if they avoid driving during high risk times, they may receive a favorable driving score via usage based insurance, and that may result in lower insurance rates over time.
4. Safe drivers
Want to know something funny? Almost everyone behind the wheel believes they’re an above-average driver. It’s called illusory superiority: “Drivers consistently rate themselves as better than average — even when a test of their hazard perception reveals them to be below par,” according to Mark Horswill, a psychologist at the University of Queensland in Australia.
That said, drivers who really can deliver on their own safe driving self-confidence stand to gain a great deal from usage based insurance.
What to tell them: Offer your customers a safe driver discount with PHYD insurance. Let them know that if their driving is good, their premiums will go down periodically.
In addition to staying within the speed limit, safe driving habits include avoiding sharp turns, hard braking and aggressive acceleration events to name a few. Customers who practice those behaviors – or who believe they could, if they put their mind to it – will probably be happy to self-select and request the switch to usage based insurance.
Ready to empower your policyholders?
Tell these four customer segments how usage based insurance could be of benefit. Of course, there are many types of usage based insurance programs and details vary by state. Learn more about how UBI works for drivers here.