4. What Are the Prospects for Usage-Based Insurance?
What we saw in 2011: Several insurers "launched their own versions of usage-based offerings, indicating that the industry sees this market poised for growth"
What happened in 2012? According to Strategy Meets Action research that came out in December, 70% of North American P&C insurers are "engaged in some stage of usage-based insurance, whether they are operating active programs, conducting pilots, or building strategies." "I think we've reached the tipping point," SMA's Mark Breading says. "Every large insurer writing auto is moving into the marketplace. Every second-tier, midsize company is planning it, or has some internal pilots — they're doing something."
The issue now, though, isn't insurer or consumer acceptance. It's understanding what telematics data means and how to develop an insurance program around it that challenges insurers now, Breading says.
"The technology is the easy part. But we collect all kinds of data, what kind are we going to use for our underwriting and pricing?" he asks. "It may be great to collect this information about hard braking, for example, but in the end they may find it might not have anything to do with accident rate." In fact, the technology is only getting easier for insurers. In-car computing platforms are making it easier to gather data, with carmakers, OEM companies and cellular carriers competing for insurers' attention.
"We asked insurers: 'Over time, who do you think is going to own the device and whose going to own the data?' Now, the insurer owns both," Breading says. "But in the future the device is probably not going to be a proprietary device the insurer gives to its insured — it's all going to migrate to the systems that are coming standard in the cars or the mobile phone."
