This year will likely see “rapid expansion” of telematics and usage based auto insurance programs among North American insurers, notes a new report from industry research firm Strategy Meets Action.
According to SMA’s research, 70% of auto insurers are in some stage of executing, developing or planning UBI programs. There are currently 18 insurers that have UBI programs active in at least one state or province.
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Progressive Insurance is most extensive to date, with UBI programs active in 43 states and six UBI-related patents.
“2012 was a breakthrough year for UBI as Progressive brought it to the mass market in the U.S.,” notes Richard Welch, guest author of the report. “2013 is likely to be characterized by a rapid expansion of the number of companies offering UBI options to their customers.”
Most insurers who are using telematics for usage based auto insurance are using the method to provide discounts, but nearly 30% also have value added services, notes the firm’s second report on the subject, released Tuesday.
Among those companies using UBI programs to calculate discounts, mileage is the most frequently used data element, followed by time of day, braking, and speed, suggests the report, which is based on a survey of 110 North American insurance professionals, conducted in the last quarter of 2012. The research also included more than 25 interviews with industry participants.
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Many insurers (43%) cite customer retention as a major benefit to such programs, more so than gaining new customers through their UBI programs, the report notes. More accurate rating, reduction in costs and claims control were also among the benefits noted.
Challenges do remain for those looking to implement programs, including IT barriers, costs and patent issues, the report notes.
“Insurers that gain early experience with marketing, product design, loss history, underwriting, and the servicing of UBI programs will be the most successful,” suggests SMA partner Mark Breading. “Data will be king; companies should be prepared to manage and analyze data in large amounts.”