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Seventy Percent of Auto Insurers Planning to Launch Usage-Based Insurance

Source: Insurance Technology

Posted on 20 Feb 2013 by Neilson

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Auto-based insuranceWhile a third of auto insurers offer some form of usage-based insurance (UBI) today, overall penetration of the product in the market is expected to stay low in the immediate future, according to research from Boston-based insurance technology analyst firm SMA.

Insurers largely expect only about 5% of overall policyholders to enroll in usage-based insurance by the end of next year. By 2020, the prevailing view is that one in five policyholders will enroll in UBI.

That isn't stopping insurers from exploring the product. A total of 70% of respondents are planning, piloting or using it today. And, it seems the early vision of "pay-as-you-drive" insurance is prevailing, with miles driven the runaway most-used data point in UBI programs, followed by time of day.

"Pay-how-you-drive" is gaining steam as well, however: The next four most popular data points for UBI rating are braking, speed, acceleration and sharp turns. Where people are actually driving, however, does not matter as much in refining UBI-based premiums.

"Of the 10 types of information now collected, miles driven is the one factor that has historically been a central rating factor (although it can now be precisely verified)," SMA says. "Fewer existing programs are leveraging location or routes driven."

Both business-side and IT executives cited cost as the major hurdle to overcome for UBI implementation. With "black box" devices representing a major component of that cost, it's no surprise that the majority of survey respondents expect UBI programs of the future to collect data via in-car platforms or policyholders' own smartphones. Only 5% expect insurers to provide black boxes in a decade, compared to 53% expecting in-car technology and 20% expecting smartphone utilization to be in the lead.

"Automobile manufacturers are already building a variety of data collecting devices and services into new cars, so this model is likely to expand," according to SMA. "As telematics technology improves, it will become easier to track, store, and analyze the incoming data."




The Old Guy Feb 20 2013 11:21AM Report Abuse
How about "Big Brother is Watching You...give away your privacy to save a buck or two!" We are going to see, if the above is true, 20% of the drivers allowing insurance companies to record how and where we drive, the speed, braking, tight turns, etc., which can then be subpeonad by the police, or any other government agency, not from the driver, but from the insurance company, who has no right of privacy of their records. LOL
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