Leading insurers are getting ahead by redefining risk management. As the industry introduces more personalized, data-driven solutions, usage-based insurance (UBI) is emerging as a game-changer for those seeking a competitive advantage. UBI provides unprecedented insights and opportunities for insurance carriers who are willing to innovate.
The insurance industry has been using the power of GPS, wireless communication and data analytics to build telematics programs since 1998. Although this information was available, few insurers had the technical power to use it and continued to rely heavily on generalized data, historical trends and static pricing models.
Now, the technology to support telematics is more widely available, and we can process movement data in real-time. This has ushered in a new era of insurance risk management. UBI represents the next step in this evolution, offering insurers a more nuanced and accurate view of risk.
Until recently, personal lines insurers have led the industry’s telematics expansion, but commercial carriers are feeling the pressure to evolve. The commercial auto ecosystem is primed for a boom in telematics. A great first step is to offer a usage-based insurance commercial auto product and see how customers respond to it.
In a world where nearly everything can be personalized, from cars to sneakers and cell phones, customers expect to get exactly what they want, when and how they want it. Insurance has not been exempt from delivering on these expectations. Insurers who offer highly personalized policies attract a broader customer base, giving them a competitive advantage.
Usage-based insurance models have shifted the industry from traditional rating methods to much more dynamic pricing models that are based on real-time data and actual risk exposure. Being priced based on transparent and controllable factors, like speed and hard braking, is appealing to commercial fleets who have battled rising premiums year over year. Offering policies that help fleets manage their insurance costs fosters a collaborative relationship and deepens their loyalty.
Commercial fleets are already using telematics to improve their operations. It’s easy for insurers to leverage this data quickly with the help of experienced partners, like SambaSafety, that have integrations with most of the leading telematics service providers (TSPs).
Beyond the financial benefits that make usage-based auto insurance an attractive option, it also has a positive environmental impact. Usage-based insurance incentivizes driving fewer, more efficient miles which leads to both safer roads and a reduced carbon footprint.
Usage-based auto insurance goes beyond risk assessment. It’s also a powerful tool that can be used for risk mitigation. There are three primary ways that UBI can help mitigate risk for insurers:
A recent SambaSafety study revealed that both distracted driving and speeding are on the rise, but UBI can be used to help reduce these risky behaviors. Insurers can use the granular telematics data to incentivize good driving with discounts and reduce poor driving habits. This helps the policyholder lower their premiums and the insurer reduce the frequency and severity of claims.
UBI programs that are coupled with training are more effective at improving risk outcomes. On average, SambaSafety customers who use both monitoring and training experience a 77% decrease in violations.
Real-time monitoring and data analysis can protect both the policyholder and the insurance company from fraudulent claims activity by providing accurate loss facts, including video.
Understanding the individual driving behaviors, vehicle usage and environmental factors at play across a book of business is incredibly powerful for an insurer. It empowers them to underwrite policies with more accuracy, price with confidence, reduce uncertainty and improve loss ratios.
Offering usage-based insurance is an excellent retention strategy that insurers could afford to leverage more. UBI creates a unique opportunity to engage with policyholders on an ongoing basis, establishing a feeling of partnership. Having an insurance company that delivers driving feedback, promotes ongoing and remedial driver training and rewards safe driving is a big win for companies committed to elevating their safety culture. This helps policyholders to build trust with their insurer and increases retention rates.
The high-touch customer communication that UBI calls for is also an excellent cross-sell opportunity. Insurers can use telematics data to identify opportunities to offer additional coverages based on driving patterns.
While the benefits of usage-based auto insurance are clear, implementation can be complex. Insurers must navigate many challenges, from integrating telematics technology to managing the quality of large volumes of data to privacy concerns. However, with the right partners and strategies, these hurdles can be overcome, leading to successful UBI programs that deliver tangible results.
The best partners will have integrations with most TSPs and offer configurable solutions, allowing the insurer to offer UBI to more policyholders and making implementation easy. Data aggregation solutions, like the ones that we offer at SambaSafety, streamline the process of implementing telematics. Our customers regularly reduce their time to market for UBI coverages from years to under 90 days because our device-agnostic approach offers effortless connection to a deep ecosystem of telematics devices and brands.
As the insurance industry continues to evolve, those who embrace UBI will be better equipped to navigate the challenges and opportunities ahead. By leveraging data to gain a deeper understanding of risk, insurers can improve their bottom line, support policyholders’ risk mitigation efforts and boost client retention. Get a step-by-step guide on how to take your risk management to the next level with our Telematics Playbook!
How Carriers Can Leverage Telematics Pricing Models to Transform Insurance Programs