U.S. consumers more motivated by smartphone app that scores driving than premium discounts: LexisNexis UBI study

Consumers in the United States are more motivated by a smartphone app that scores their driving than they are in premium discounts when considering enrolling in a usage-based insurance (UBI) program, according to LexisNexis Risk Solutions, a provider of data, analytics and technology.

According to results for the consumer market from the fourth annual 2015 LexisNexis Usage-Based Insurance Study, UBI programs based on safety offer the potential to boost adoption, while also engaging consumers, mitigating risk and improving retention, LexisNexis said in a press release on Tuesday. [click image below to enlarge]

The 2015 study was based on a total of 2,042 interviews completed with a representative sample of consumers. Last week, LexisNexis released results from the study focusing on surveys from 455 U.S. commercial fleet managers/policy decision makers. That survey found that 58% of respondents would switch insurance carriers if they were offered a “fully loaded” UBI package, consisting of a 10% premium discount, fleet management services and the technology of their choice.

“Historically in the U.S., usage-based insurance has been defined as a program to reward good driving behavior with discounted insurance premiums, however, offering a premium discount is becoming less attractive to drivers and less sustainable to insurers,” said David Lukens, director, telematics, LexisNexis Risk Solutions, in the press release. “Consumers are looking to measure themselves and connect with others across all aspects of their lives and driving is proving to be no different.”

Related: 58% of U.S. fleet survey respondents would switch carriers if they were offered a “fully loaded” UBI package: LexisNexis study

In the study, LexisNexis tested a UBI safe driving concept or a program, which consists of a smartphone app that measures driving behavior, scores driving, and then provides feedback (speed, acceleration and phone use) so drivers can improve their score without any discount offered. Estimated demand for the safe driving concept, at 22%, is 7% higher than a UBI concept or program with a 10% premium discount, the study found.

LexisNexis also tested the concept of a leaderboard feature that allows users to see how their driving scores stack up against those of other app users, similar to friends and family exercise tracking devices. Even when high scores are achieved, consumers are likely to continue to monitor their driving scores. In fact, 77% of consumers said they would continue to use the app to get feedback even if given a below average telematics score, “implying that the safe driving concept may have the potential to change driver behavior,” the press release said. [click image below to enlarge]

Simply put, premium discount-based UBI doesn’t appear sustainable, LexisNexis said. In 2014, 18% of respondents expressed interest in participating in a UBI program with a 10% premium discount; in 2015, carriers would need to offer a 15% discount to achieve the same market coverage. A sizable 52% of survey respondents, however, would be more likely to enroll in UBI if they were offered a $200 discount on their insurance deductibles versus a 10% discount on their insurance premium.

Over the last several years, some carriers have experimented with value-added services (VAS), such as emergency roadside assistance, automatic emergency crash response and stolen vehicle tracking and recovery, to drive UBI adoption rates. The research shows that VAS or rewards for good driving behavior, such as free oil changes, loyalty points or miles and free roadside assistance, offer a minimal increase in estimated demand, “suggesting they may not be needed at this phase of the market’s evolution.”

The study found that while there was a jump in UBI awareness from 10% in 2010 to 36% in 2013, since then consumer awareness has roughly levelled to 39% in 2015.