Insurance Telematics in the US: Ready to Grow?

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Insurance Telematics in the US: Ready to Grow?

The Insurance Telematics USA 2012 conference will gather insurance carriers, regulatory officials, DOT managers and consultants to discuss upcoming standards and state level regulatory criteria regarding UBI and insurance telematics.

The line-up includes Towers Watson, amongst other experts, who will reveal the key sales models and tactics to speed up UBI penetration rates. Complete your details on the right to download the brochure. >>

Why usage-based insurance is poised for growth in the US, despite low consumer awareness

To the industry optimist, insurance telematics in the US is surging. Progressive, one of the largest auto insurers in America, has launched SnapShot, a pay-as-you-drive (PAYD) insurance program available in two-thirds of the country.

The program tracks miles driven, amount of time, time of day, and speed, and presents it all through an online reporting tool.

GMAC insurance group, meanwhile, offers a Low Mileage Discount to GM drivers who own OnStar and drive less than 15,000 miles a year. The program is available in more than 30 states.

For more insight into speeding up UBI penetration download the Insurance Telematics USA conference brochure. >>

Research from industry analyst Towers Watson suggests that 60 percent of the personal auto insurance market in the US is covered by insurers that offer some form of a usage-based insurance (UBI) program.

Robin Harbage, a director at Towers Watson and a long-time veteran of the insurance telematics space (he oversaw deployment of TripSense, one of Progressive’s predecessors to SnapShot, in its first three states) says that 10 of the top 25 insurance companies in the country have gone public with UBI programs, including Liberty Mutual (Onboard Advisor), State Farm (Drive Safe & Save), and Allstate (Drive Wise).

An additional six of the top 25 are currently piloting programs.

“The data companies collect from these programs can become a competitive tool with potentially huge benefits,” says Harbage. “Those benefits will go to the first movers. The industry is catching on, which is why it’s starting to explode.”

Learn about key sales models and tactics to speed up penetration rates at Insurance Telematics USA 2012. Complete your details on the right to download the brochure. >>

Not yet mainstream

To the industry pessimist, however, it’s a less compelling story. Yes, many auto insurers offer programs in select states, but few, if any, of these programs have become mainstream successes. “Usage-based insurance” or similar terms like “pay-as-you-drive” are yet to enter the popular lexicon in America.

While studies have shown that as many as 30 percent of US citizens would consider UBI offerings, far fewer than that actually know these offerings exist.

State-based regulatory issues make it difficult to roll out nationwide programs and occasionally challenge insurers’ ability to deploy telematics in a useful way on a regional level.

California, for instance, limits the parameters that companies can use in pricing. Furthermore, insurance providers continue to wrestle with practical ways to offset the cost of device acquisition, installation, and operating costs without asking drivers to incur some of the expense.

Learn about key sales models and tactics to speed up penetration rates at Insurance Telematics USA 2012. Complete your details on the right to download the brochure. >>

All of the active programs in the US are currently incentive-based offerings; they provide the possibility of a discount without the equal possibility of a rate increase.

John Canali, senior analyst at Strategy Analytics, says that some people propose “all sorts of funny math to justify” the business case behind insurance telematics in the US.

As device costs continue to decrease and OEMs embed telematics solutions in new vehicles, the business case will grow, but “everything is still in its infancy,” he says.

Waiting for a breakthrough

Experts, optimistic and pessimistic alike, agree that the US insurance telematics market is on the cusp of a breakthrough and that several forces could provide the spark to bring it into the mainstream.

First, as OEMs start to embed telematics solutions before cars trundle off the factory line, it helps deflect much of the cost for insurers. That’s why embedded solutions like OnStar have proven attractive to insurers like GMAC and State Farm, whose Drive Safe & Save program is available only to drivers with OnStar activated.

“If you envision a time when cars already come equipped with telematics, it’s ideal for the insurance industry because no one has to worry about hardware,” says Trautsch.

Learn about key sales models and tactics to speed up penetration rates in the US at Insurance Telematics USA 2012. Complete your details on the right to download the brochure>>

“You simply tell clients they have telematics on board, and they can sign up for these programs. The OEM model makes this very feasible.”

According to management consultancy A.T. Kearney, upward of 40 percent of vehicles in the US made in the 2010 model year have some sort of embedded solution.

If that trend continues, it makes the business case for insurance telematics far more compelling.

Bringing UBI to the Masses

Insurance Telematics USA 2012 will explore how to design bespoke UBI products and assess key sales, business model and mass management tactics to speed up penetration rates in the US. Topics include:

• New revenue streams available through UBI to secure strategic relationships with key players, such as OEMs, wireless carriers and insurers, to maximize returns

• How the industry can establish standards for data collection and sharing to protect consumer privacy, whilst exploiting the full potential of UBI

• Maximize the Govt. benefits, such as tax credits, and overcome the barriers to service distribution