Brokers generally pessimistic about UBI’s impact on their business: report

Independent agents and brokers are “generally pessimistic” about the impact usage-based auto insurance programs will have on their businesses, suggests a new report from Strategy Meets Action.

About half of agents included in a survey by SMA said they believe it will be difficult for them to sell UBI products, and more than a third said they think “significant training will be required,” according to the research brief.

About a third (35%) also said they predict agency market share will declines as UBI sales progress in the direct market, and only 25% see is as a source of new growth, according to the report, which included results from the survey of 110 insurance company professionals and 43 agents and brokers in North America.

In terms of commission levels, just over half said they believe their commissions will decline as a result of UBI sales.

Less than 20 companies in the United States and Canada have active UBI programs in at least one state or province, and about six have programs in five or more regions, according to SMA.

About 11% of companies are piloting programs, and 42% are “engaged in planning,” the firm says. It estimates that overall market penetration is between 1% and 1.5% of the total insurance market.

“As of now, there are no proven business models to follow,” the report says. “This task takes on a unique set of challenges for companies in the agent/broker market, where the value proposition must also consider the role of the distribution channel in order to be successfully executed.”

It’s still up in the air as to whether UBI programs will help or hurt the agent/broker channel, the report notes. Most insurers also predict the market penetration increasing faster than agents and brokers do, according to SMA’s research.

So far, most brokers and agents haven’t put much effort into factoring UBI programs into their business strategies, SMA says.

That’s a major contrast to the United Kingdom, where insurance aggregators “have at some cost jumped into UBI aggressively, seeking to be the gatekeepers of UBI data and in the process, to maintain control of the customer.”

For brokers and agents to capitalize on UBI and compete with direct writers, they’ll need to invest in educating themselves and consumers about the benefits of the programs, the report suggests.

Insurers, too, will have to work with brokers to help them understand what their role can be in selling UBI programs, and also post-sale, the report adds.