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Insurance Telematics Business Models: Beyond the Discount

A growing number of auto insurers are looking beyond the discount in anticipation of usage-based insurance (UBI) becoming mainstream.

Psst! Want a discount on your car insurance? Turns out that's a line a growing number of drivers just cannot resist.

A generous discount through insurance telematics has been the chief selling point of Progressive's Snapshot solution in the United States.

"The essential value proposition for the next three to five years will be the discount," says Praveen Chandrasekar, program manager for telematics and infotainment research at Frost & Sullivan.

Still, a growing number of auto insurers is starting to look beyond the simple discount in anticipation of its role diminishing as insurance telematics, or usage-based insurance (UBI), becomes mainstream.

It's what's already happening in Italy, a country with the highest insurance telematics penetration rates in the world. But even in the United States, companies like State Farm are starting to look at ways of bundling straightforward driver tracking with other value-added services to differentiate themselves from competition.

[Insurance Telematics USA (Sept 4-5, Chicago) will outline how insurers will enhance the consumer UBI proposition by integrating complimentary services for product differentiation: Click here to sign up]

This typically means moving from the pay-as-you-drive (PAYD) business model, which calculates premiums according to the number of miles driven, to pay-how-you-drive (PHYD), which factors in driving style, and manage-how-you-drive (MHYD), which also incorporates driver feedback.

"In five or ten years, all insurers will have dynamic driving data, so all will be able to offer discounts," says George Ayres, vice president of global sales for Verizon Telematics. "There will be no more asymmetry in terms of what they know about customers, so price alone won't be as effective [for acquiring and retaining customers]. ...The insurers who are out front on this idea are realizing [that soon] all will [have to] start to provide much wider breadth of services to keep those captured through price."

These services can be as simple as sending additional driving data to the driver's smartphone, or as complex as auto insurance bundled with a customer relationship solution that sends alerts for scheduled maintenance.

Although Dave Pratt, general manager of UBI at Progressive, reports that his company is sticking with the discount-only business model for now, he says his company is considering a broader range of services in the future.

Insurance Telematics USA Conference & Exhibition (Sept 4-5, Chicago) breaks this topic down even further, discussing all areas of the insurers mind-sets and business models when including telematics in their policy portfolio. Topics include:

• Get to grips with insurer UBI objectives such as improving loss ratios, building a portfolio of safe drivers and enhanced customer relationships to align business models with requirements

• Explore how to enhance the consumer proposition by providing the ability to personalize value added service portfolios to resonate with specific demographic targets and increase customer satisfaction

• Identify consumer benefits of UBI such as complimentary services e.g. roadside assistance and/or reduced premiums for maximum customer retention and growth stats

Speakers include Progressive, American Family, Plymouth Rock, Liberty Mutual, Zurich, The Hartford, Esurance amongst many others, as well as leaders from the telematics community.

Full details can be found by clicking this link.

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