Regulation, technology and globalisation have had a significant impact on how the insurance industry has evolved over the last few decades. Nothing, however, has transformed the insurance industry as much as the changing needs of the consumer.

Today, consumers are not only looking for an insurer who offers a competitively priced policy; they also want it personalised to suit their lifestyle. Our Customer Compass research found that 20% of multiple policyholders claim that a lack of personalisation is a ‘main reason’ for leaving a provider. In 2021, we believe insurers will continue to evolve their offerings when it comes to personalised insurance products and usage-based insurance will be a crucial element in this effort.

Personalisation is king

Motor insurance is by far the most widely adopted use case for UBI, with insurers offering drivers insurance based on how far, how well, when, and even why they drive. The interest has been significant, and the uptake is only set to increase. Research by UnivDatos Market Insights shows UBI is expected to surge in the coming years, with the global market set to grow by nearly 25% in the next six years to reach £69.5bn.

Our research confirmed this trend and found that 54% of consumers would now consider a car insurance policy they only pay for if and when they drive. Since the start of the pandemic, this type of offering has been of particular interest to drivers who haven’t had to commute to work and are looking for ways to reduce their insurance premiums. In the face of such change in how cars are being used, motor vehicle insurers are leaning toward UBI.

Typically, the most common UBI models have looked at how many miles the car is being driven, or the driver’s behaviour, or a combination of these factors. Insurers have also started to spice up their offerings and have bundled popular value adds, such as weather and traffic alerts and rewards for good driving.

Driver behaviour and mobility patterns have shifted over recent years, aided by new technologies and the advent of the connected car, and new UBI models are appearing.
One example of this is the emergence of the sharing economy, which has introduced the likes of ridesharing, a term used to describe companies such as Uber and Lyft which connects passengers to drivers via mobile apps. This is another market which has seen significant growth over the last several years and is expected to grow by more than 50% in the next year. Looking further forward, we predict usage-based insurance will be the preferred model used to underwrite autonomous vehicles.

Making the most of the opportunity

What insurers need, however, and few currently have, to support these existing and emerging UBI models is a technology platform that can be configured to support them. Each model has its own requirements for the buyer journey, the administration of the policy, premium billing and the claims process. These individual features need to be configured to support a personalised UBI product.

Ridesharing, for example, presents a significant challenge for insurers. How can insurers accurately underwrite and price based on why the car is in use?

Rideshare drivers cycle through four phases which crossover commercial and personal lines of coverage; off the clock, on the clock waiting for the first customer, pickup and driving to the destination, and on route to the next pickup. Typically, ridesharing company policies do not cover all the stages as drivers constantly move between personal and commercial use, and the coverage, limits and deductibles vary depending on the ridesharing company. This leaves coverage gaps for the drivers. Insurers have an opportunity to provide continuous coverage that is competitive and profitable.

Whether the customer uses its vehicle for commercial uses; or to navigate the M4 when commuting to and from work two or three times a week in the New Normal -- they will continue to look for an insurance policy which has been personalised to suit their needs. What consumers want is insurance which better reflects their usage and driving behaviour. If they are travelling infrequently, are excellent drivers, appreciate the extra services, share their car, or like the additional support provided by safety alerts and feedback on their driving, they want the policy pricing and rewards that reflect their usage.

What insurers need to compete in the market is the ability to provide a UBI offering that uniquely matches consumer needs and accurately underwrites the risks associated with it -- including number of miles, where (is it a congested traffic zone?), when (is it a safe time of day?), how the car is driven (is there hard braking or speeding?), and why (is it personal or commercial use?) -- to accurately calculate the premium.

The future looks bright

Every customer -- whether it’s a consumer looking to save on their policy or a ridesharing organisation looking for a tariff to suit their business model -- is different. In 2021 and beyond, insurance customers will continue to demand more choice when buying cover. With technology improving every day and delivered at a lower cost, a one-size-fits-all policy is a thing of the past and UBI-styled insurance, based on data-driven insights, gives insurers the capability to provide the personalised experience the customer is demanding.

Share Story: