Rising interest in—and adoption of—usage-based insurance (UBI) are among the shockwaves of the COVID-19 pandemic still rippling across the personal auto insurance landscape. Despite premium rebates and refunds exceeding $11 billion that were prompted by the sharp drop-off in miles driven, many consumers have taken this time to reevaluate their auto insurance needs with a keen interest in product offerings that are more reflective of their new driving habits.
Moving through 2021 and beyond, insurers must respond and there is a growing imperative to intensify profitable growth and retention initiatives. To compete effectively, insurers must double down on new strategies to help identify, engage, convert, and retain the best risks. Telematics can do just that.
Across both the standard and nonstandard personal auto markets, driving behavior can be a powerful risk indicator that goes above and beyond traditional proxies such as age, marital status, geography and even credit. When harnessed, telematics-driven insights can support robust risk segmentation and precise pricing that promote more accurate rating and improved profitability.
A Path Forward for UBI Innovation
Since the UBI concept was first introduced over a decade ago, data-collection models have prevented insurers from delivering personalized UBI discounts during the quoting process. Instead, new UBI policyholders receive a preliminary participation discount and are asked to install a hardware dongle or mobile app that monitors their driving for a set period – often several weeks. This lengthy monitoring period was, at the time, an unavoidable step required to collect the volume of driving data needed to calculate a final behavior-based discount.
Driving behavior data generated by connected cars can flip this model on its head. The Verisk Data ExchangeTM collects and normalizes trip-level telematics data from millions of consenting drivers on a rolling basis. These vehicles span multiple leading U.S. automakers, including the recently announced integration with Hyundai. When one of these drivers begins a UBI application, Verisk can deliver weeks or months of historical driving behavior data to enable the delivery of an accurate, personalized driving discount at point of quote in seconds—no observation period and no hardware or software to install, and no premium leakage from a preliminary participation discount.
Many auto insurers already have hardware- or mobile-based UBI programs in-market, and the incorporation of connected cars as a data source can be viewed as a complementary model. In fact, Verisk’s scoring model can support data from many sources of telemetry, including dongle and mobile app vendors. Alternatively, driving data from Verisk can be custom formatted for compatibility with insurers’ existing, proprietary scoring algorithms. The addition of connected car data only generates more flexibility for insurers’ programs.
Using Connected Cars to Drive UBI Growth and Delight Customers
The rolling collection of driving behavior data outside the traditional insurance policy cycle allows insurers to access an innovative new lead source capability using Verisk’s Discount Alert program. Already recognized as a powerful risk indicator, this data can drive robust marketing lead segmentation. Then, using the Verisk Data Exchange’s direct connections to automakers’ digital ecosystems, insurers can deploy customizable offers that yield engagement and conversion.
Discount Alert allows insurers to perform sophisticated, proactive prospecting to anonymously identify ideal marketing targets based on actual driving history. Using the Verisk Driving ScoreTM, a loss-based proprietary scoring model, and additional business rules such as geography or mileage, an insurer can target marketing offers to specific cohorts of connected car drivers who align with existing growth targets.
Once these target prospects are identified, Verisk uses connections to automakers’ digital ecosystems, including mobile apps and online owner portals, to deliver high-impact offer notifications. Discount Alert helps provide a truly personalized marketing message—even including the driver’s own safe driving discount—as a powerful incentive to begin a quote. This first-of-kind channel is far less noisy than many digital or traditional advertising alternatives and capitalizes on the natural affinity of auto ownership.
Drivers who respond to these offers can be prompted to begin a quote immediately. Verisk can provide the applicant’s historical driving data, with consent, from the Verisk Data Exchange and prefill more than 400 additional underwriting variables from LightSpeed® Auto, Verisk’s solution for one-rate auto insurance acquisition. The result? A streamlined customer experience with expedited, accurate quoting and near-real-time delivery of the applicant’s personalized discount.
To support the growing UBI market, the Verisk Data Exchange is connecting insurers with leading automakers including General Motors, Ford, Honda, and Hyundai. With interest in UBI on the rise, connected car telemetry is poised to enable tremendous innovations and improve the customer experience. The Exchange helps insurers harness this data’s power for pricing accuracy and unlock new use cases, such as Discount Alert, for proactive prospecting and engagement.
Learn more about how the Verisk Data Exchange can help power the telematics journey for you and your customers, or contact a Verisk representative today.