2013 will see "rapid expansion" of telematics programs in North America

Jon Shapiro

Good information and I hope to see all Insurance Carriers adopting a UBI Program. Depending upon the data requirements, market drivers and the other factors will determine how these UBI Programs are structured for both consumer and commercial customers.

Posted February 24, 2013 06:30 PM

Blair Currie

I'd agree with the Strategy Meets Action research that insurance telematics will start to pick up first in the United States and then very late in 2013 in Canada when the first auto insurers outside the Province of Quebec will start to enter the field.

1.) Current low penetration/base

Although Pay as you drive (PAYD) and Usage based insurance (UBI) have been available for about ten years the business model has not been strong enough and consumer pull hard enough to have more than about 2% of all vehicles in North America connected with insurance telematics.

2.) Changing economics

With device and monthly costs dropping rapidly the business model is starting to make more sense to auto insurers and the US consumer is aware and asking for PAYD or UBI as an alternative to regular auto insurance. Further, actuaries are getting accustomed to working with behavioural data and blending this with the tradition driving proxies to set insurance premiums. All these factors coupled with Progressive stating that it has over 1 million policyholders on PAYD and is booking over USD1 billion in premiums is causing others to both accelerate these programs and enter the game.

3.) The United States

In 2013 we expect to see a number of major auto insurance carriers to start promoting their own UBI programs that will be differentiated from the Progressive model. Many of these programs will involve semi-permanent installations of hardware and will target different segments including Young Drivers, Mature Drivers, Drivers who have had an incident/event in their history, etc. There will be somewhat of a tipping point - starting of course from a small base.

4.) Canada

In Canada a number of domestic and foreign owned/influenced auto insurers will get into the UBI space with perhaps different programs. While some will base these on US models, which up until now have largely featured on price, the Canadian models will differ and may also involve surcharges for bad driving behaviour as one of the US programs currently does.

5.) Data and/or relationships

While data will still be king for some we think that other models will emerge where data is important but relationships with policyholders will become more important. So there will be pricing models and Customer relationship management (CRM) models driven by the same type of insurance telematics programs.

6.) New players in the space.

Finally we believe we will see other players get into the UBI space. This will include device manufacturers (TomTom already does this in Europe), wireless carriers as they expand their M2M programs and other software players. We might also see more automotive OEM's than Ford get into the business through alliances with auto insurance companies.

And as the business grows we will see a heirarchy of consultants emerge including the telematics service providers (TSP's), IT Consultants and Business Process Consultants. There will also likely be deal and alliances made among these partners as the IT and Business Process Consultants have strong brands, but the TSP's have the experience and driver insights and experience from deploying programs, analyzing and visualizing the data and providin intelligence.

7.) Conclusion

It's an exciting time for the business and a good time to investigate business models that learn from the successes and indeed the challenges faced by the pioneers in this business.

That's where experience will come into play and where both the companies and individuals who have shaped this industry so far will be in demand.

Posted February 20, 2013 01:50 PM

Albert Schmidt

Plenty of other challenges as well. Privacy considerations like where is the data stored, who has access to it and how will it be used exactly? How do you differentiate between 2 or more different drivers on a policy?

Braking and acceleration are interesting variables, but how will winter weather in Canada be accounted for? You might be accelerating as far as the telematic device is concerned, but you might only be travelling at 2km/hour in reality.

UBI and telematics may provide an interesting future for insurance around the world.

Posted February 20, 2013 10:47 AM