Usage-based Insurance. C-Counsel Consultant

Transcription

1 Usage-based Insurance Robin Harbage C-Counsel Consultant

4 What is usage-based insurance (UBI)? UBI programs collect data on driving behavior from telematic devices and use that information to modify insurance premiums or to provide useful feedback to policyholders, or both. Companies have UBI programs around the globe Many other companies, including small companies, are moving toward implementation 2009 EMB. All rights reserved. Slide 4 MileMeter Notable Programs GMAC SafeCo Verified CSAA Safety Mileage Travelers Services Behavior Rating Progressive Aviva American Family

5 How does UBI work? Market Im mprove Rating Quote Impro ove Drivin ng Driver Customer Feedback Loop Policy Period Collect & Analyze Company Feedback Loop Underwriting Fee dback Driving Score 2008 EMB. All rights reserved. Slide 5

6 Important Questions What should device specifications include? What devices include critical functionality? What investment is the required and how to optimize the return? What data is pertinent? Is the data accurate? How much data is required? How to transfer, store, and analyze all this data? What do consumers s want? How to begin without loss cost models? 2009 EMB. All rights reserved. Slide 6

8 GMAC Mileage Discount Only available to OnStar subscribers in 34 states Odometer readings sent from OnStar to GMAC with subscriber ss permission Average initial discount of 26% Maximum discount of 54% High mileage receive 5% discount for subscribing Self selection is real. Source: The Plain Dealer - July 17, 2008; WSJ - June 26, EMB. All rights reserved. Slide 8

9 Progressive s MyRateSM Optional program Game-changing program maturing and growing. Wireless device plugged into OBD II port Records how, how much, and when the car is being driven Insureds can select which vehicles to enroll Up to a 61% discount on BI, PD, PIP and Coll at renewal Surcharge of 9% can apply 2009 EMB. All rights reserved. Slide 9

10 Travelers IntelliDrive TM Discount for participation Mileage used for rating Data used for research Additional services Teen monitoring Vehicle locator Driving info at secure website Requires professional installation Minimum 12 month, with $100 fee for early termination Difficult to get traction with professional installation EMB. All rights reserved. Slide 10

11 CSAA udrive Available in Nevada Discount up to 10% per vehicle for participation Up to 5% additional savings at renewal under 10k miles Information on driving habits via personalized website Vehicles made in 1996 or newer are eligible The number getting into the game is growing EMB. All rights reserved. Slide 11

12 Hollard in South Africa Includes a minimum fixed premium and a variable premium based on the mileage of the vehicle for the specific month Fixed premium includes coverage for at least 417 kilometers, agps tracking device, and non-collision losses. Extra mileage is subject to a small tariff per kilometer You can thus control how much you spend on vehicle cover premiums. Consumers appreciate the control. Source: EMB. All rights reserved. Slide 12

14 Personal Auto Early pilots used professionally installed OEM or after-market devices Subsidized cost for learning Inconvenient for consumers and low adoption rate Opportunities as device costs decline Multiple electronic makers offering devices Reliable self-installed devices becoming available 2009 EMB. All rights reserved. Slide 14

15 Devices Providers Are Plentiful Danlaw IMS GreenRoad Hughes CalAmp Xirgo Trimble TrafficMaster Qualifications, experience, and availability vary significantly 2009 EMB. All rights reserved. Slide 15

16 Device Components What data is collected? How does the device receive power? How much memory is required? How is data transmitted? How often is data collected? Is data calibrated for accuracy? Is raw data collected or condensed d on device? Can device be remotely upgraded? 2009 EMB. All rights reserved. Slide 16

23 Alternative Models Dedicated Device Insurance must pay for device and install Need self install to appeal to mass market Reasonable cost Ease of use Shared Services Device Device is able to support added value services outside insurance for example Satellite Navigation Rerouting to avoid Traffic Congestion Theft Tracking Speed camera warnings Emergency Call etc. Hard install may be required for these 2009 EMB. All rights reserved. Slide 23

25 Integration with existing systems The data is not standard insurance data High data volume Numerous IT challenges Cost/benefit trade-offs between research and production 2009 EMB. All rights reserved. Slide 25

26 Analytics Data Flow Device Journey Data Impact Data Policy / Vehicle / Device Matching Data Scoring Admin Systems Claims Data Analytics Device Exception Report MI Reporting Crash Data Driver Profile Data EMB Infrastructure

29 Customer Feedback

33 Data Sources Internally recorded by device Clock, Accelerometer Obtained from vehicle diagnostics VIN, Odometer, Speedometer, Engine operation Obtained from external sources GPS, Maps, Weather, e Traffic Developed from raw data 2009 EMB. All rights reserved. Slide 33

34 Levels of Aggregation Customer Policy Driver Day Journey Road Segment Manuver Second For a given Factor Understand where the factor operates in the hierarchy of aggregation More granular provides better discriminators and less proxies Factors can exist at any level 2009 EMB. All rights reserved. Slide 34

37 Why now? There a numerous reasons why UBI is gaining momentum Technology costs have dropped Predictive power significantly enhances accuracy of prices Participating consumers love it Accident reduction potential Politically accepted Retention dramatically increased 2009 EMB. All rights reserved. Slide 37

38 Tremendous predictive power Various studies demonstrate predictive potential Companies gain competitive advantage through better segmentation Elimination of cross-subsidization is more fair 2009 EMB. All rights reserved. Slide 38

39 Appeals to participating consumers Once educated, UBI appeals to consumers Makes sense Controllable Side benefits As it is causal, reduces reliance on risk proxies Insurance credit scores Driver assignment Charges for relatively rare accidents, convictions 2009 EMB. All rights reserved. Slide 39

40 Even the regulators can support this Unlike many innovations, regulators should love this too Fairly discriminatory Saves lives Environmentally friendly Addresses affordability issues EMB has experience introducing usage-based programs 2009 EMB. All rights reserved. Slide 40

41 Reducing Risk Cost with Telematics Risk Segmentation Deriving risk factors from the data, and applying loadings / discounts to customers to enhance selection Risk Influence Customer feedback on behaviours to avoid Reducing Vehicle usage overall, and especially higher risk miles Claims Effectiveness Informing the claims process Use of telematic data as evidence Non-fraud Self-selection Safer drivers Risk Influence HOW? WHERE? WHEN? HOW MUCH? Self Selection Reducing underwriting and claims fraud 2009 EMB. All rights reserved. Slide 41

42 Improves driving and reduces accidents UBI experience significantly better Norwich Union: 30% frequency reduction GreenRoads: 54% improvement in fleet crash rate Iceland postal service reduced crash rate by 56% Pepsi (Iceland) reduced fleet crash rates by over 80% Early adopters will have increased profits and a competitive advantage 2009 EMB. All rights reserved. Slide 42

43 Added Value Services Safe Driver Coaching In vehicle feedback Web site reports Emergency Call Detect significant impacts Send text alerts ( Where am I message) Real-time service to dispatch help Theft Service Detect motion without ignition Tracking and call for help Geo-fence Service Detect location outside boundary zone Trigger notification Subscription services could help subsidize the costs 2009 EMB. All rights reserved. Slide 43

44 What does this mean? Devices can track simple or very detailed driving behavior Significantly increase pricing accuracy Minimize reliance on detailed questions and controversial proxy variables Help customers understand and eliminate risky behaviors Differentiate product offering via additional services All this means increased profits and retention! 2008 EMB. All rights reserved. Slide 44

45 UBI is a significant advantage for early adopters! If provide feedback to drivers, can drive the costs down even lower to increase advantage UBI at Renewal (w/ Feedback) $1,200 $1,100 $1,000 $900 Ind All Ind UBI w/ Feedback 2nd UBI Offer Ind Onset General Offer 2nd UBI Offer w/ Feedback Prem mium $800 $700 $600 $500 $400 $ EMB. All rights reserved. Slide 45

47 Build an appealing proposition Reduced price Break commodity status Customer in control Ease of use ( Plug & Play ) Understandable model Lower losses Cost to consumer Overcome privacy objection Two way price changes What does customer want? 2009 EMB. All rights reserved. Slide 47

48 Significant Investment Requires management commitment Long lead time to implement Large dataset needed for accurate UBI score Danger of collecting worthless data Telematics costs are dropping Best technology is morphing Data transmission costs drive investment 2009 EMB. All rights reserved. Slide 48