There’s no doubt that the accelerating interest in telematics data and usage-based insurance (UBI) has been a boon to the insurance industry and its customers. In fact, a majority of auto insurance customers are now willing to share a broad range of telematics data for lower premiums and coverage that better fits their needs 1 UBI is helping insurance carriers better assess risk and price appropriately while helping consumers see prices based on their own driving behaviors. We can be fairly certain about the value created with better risk assessment and pricing.
A little less certain is the impact on driving behavior. While I’ve seen industry promotional materials claim that UBI programs can improve driving behavior or make our roads safer, I question whether a UBI program can really help a driver with set habits become a newly committed, long-term safe driver. Is it more appropriate — or more accurate — to suggest a UBI program can simply tell an insurer about an insured’s actual driving behavior…and that’s it?
You may wonder why I’m skeptical over the idea that UBI can make a measurable, positive societal impact. For starters, my driving has been monitored for years by both my carrier and my co-workers…and yet my driving behavior has not changed.
While this question remains a difficult one to answer, a recent article2 in Insurance Business America sheds some light on the question. The article cites a study of UBI participants sponsored by the Insurance Research Council that states:
“42% of those drivers who made changes said they later drove ‘pretty much’ the same way as before. 24% admitted to occasionally reverting to old driving habits while about 19% said they only rarely engaged in their old driving habits and only 15% said the changes made were permanent.“
While 15% is better than 0%, hanging your hat on UBI programs as a sure-fire way to make the roads safer seems like an exercise in futility. That being said, there’s a lot to be gained from telematics data and UBI programs that create big upsides for carriers and their customers.
First, as a consumer, while having insights into my own driving behavior might not improve my driving behavior, it puts me in the driver’s seat when it comes to my auto insurance premiums. And, as the data shows, consumers are most interested in receiving better pricing in exchange for sharing their data.
For carriers, the true value with telematics data is being able to act on it. In other words, being able to use the data to impact business decisions. The recently released LexisNexis® Drive Metrics scoring model is our latest iteration in leveraging massive volumes of driving behavior data into a seamless tool that makes it easy for any carrier to more accurately assess risk and deliver value to their customers at the same time.
And that gets everyone to the true value of telematics data – better insights and better pricing. It sounds simple but those are the two things both stakeholder groups are looking for: carriers want to make smarter business decisions and consumers are interested in saving money. While changing driving behavior may not be a value of UBI, those who already drive the safest will clearly see the largest value.
- ‘US insurance consumers open to innovative personal lines concepts’, Deloitte 2020 Global Personal Lines Survey/US respondents, figure 6. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-insurance-consumers-open-to-innovative-personal-lines-concepts.pdf
- ‘The race is on for better telematics-based scoring models’, Scrimgeour-Brown, Mitchell. June 16, 2021, Insurance Business America. https://www.insurancebusinessmag.com/us/news/commercial-auto/the-race-is-on-for-better-telematicsbased-scoring-models-258008.aspx