Usage-Based Insurance

Transcription

1 Usage-Based Insurance A revolution is under way A presentation to OII s 2013 Insurance Education Day Advisory Council By Katie DeGraaf April 2013

2 What is UBI? UBI Benefits UBI Marketplace The Product Roadmap Data, data, data Conclusion 2

3 What is UBI?

4 Usage-based insurance (UBI) Customer Feedback Insurance Premium $1,200 $1,080 $1,000 $ 900 Company Feedback Vehicle Score VIN: Miles driven: 6,234 Event 1 per mile:.05 Event 2 per mile:.01 4

5 Customer installation experience 5

6 Telematics devices Components GPS Satellite GPRS OBD Port GPS Chip SIM Card Accelerometer Device Vehicle ARM Chip RAM Chip 6

7 The Benefits

8 UBI benefits all key stakeholders Consumers Control of premium Significantly reduced risk Understandable rating based on the how, when, where of driving Access to useful driving feedback Value-added services Green and progressive products More accurate pricing Company Consumers Regulator Better claimshandling Insurers Enhanced pricing Product differentiation and brand awareness Reduced loss costs Improved consumer satisfaction and retention Societally beneficial Product differentiation Regulators Saves lives Fairly discriminatory variables Consumer acceptance and premium control Environmentally friendly 8

9 Enhanced pricing accuracy Publicly available studies have confirmed the potential power of even the most basic information We believed that driving behavior was the most predictive rating factor but didn t expect the difference to be this dramatic. Actual driving behavior predicts a driver s risk more than twice as strongly as any other factor. Glenn Renwick, CEO, Progressive 9

10 Self-selection effect Those who perceive their vehicle is operated better than average opt in: Safe drivers Low annual mileage vehicles Highly engaged parents Drivers who had unlucky accidents Early adopters will win Latecomers will face adverse selection $800 $1,000 $1,000 $1,000 $1,000 10

11 Reduced frequency of claims Iron Mountain: 93% reduction in fleet crash rate Iceland postal service reduced crash rate by 56% Pepsi (Iceland) reduced fleet crash rates by over 80% GreenRoad: 54% improvement in fleet crash rate 11

12 Reduced frequency of claims Vehicle Score Over Time Actively Monitored Passively Monitored Vehicle Score DriveCam: 50% average reduction in crash rates Insure The Box (U.K.): 35% 40% reduction in crash rates by young drivers 12

13 Improved claims-handling Emergency response Faster accident response has saved lives Claim circumstances Vehicle recovery 13

14 Improved customer experience Control Safety Options Engagement 14

15 UBI Marketplace

16 Global development is under way Pace of development varies by region U.S. and Canada Significant UBI penetration and established programs EMEA UBI behind U.S., but significant activity Asia Limited activity, but emerging interest 16

17 Widespread presence of personal lines programs in U.S. 47 states have 4+ personal auto UBI programs implemented 17

18 Proliferation of UBI programs over the years Progressive MyRate American Family Teen Safe Safeco Teensurance Travelers Intellidrive GMAC Low-mileage discount Progressive Tripsense pilot 1997 Milemeter Progressive Autograph pilot 2011 Progressive Snapshot State Farm Drive Safe and Save Allstate DriveWise Nationwide SmartRide Hartford TrueLane 2010 Safeco Rewind Esurance Mileage State Farm OnStar AAA, NCNU udrive AAA, ACSC 2012 Esurance DriveSense/Drive Less Save More State Farm Ford Sync CSE Save Elephant DriveIQ 21 st Century DriveIQ DTRIC Akamai Metro Mile 18

19 Progressive has led the market Source: Progressive website. 19

20 Progressive Snapshot Discount SM 44 states and D.C. Nearly half a million drivers have participated countrywide to get personalized car insurance rates by sharing a picture of how they drive. Richard Hutchinson, UBI general manager 20

21 State Farm has taken a different approach Provide drivers with a wide range of new options that will make for a smarter vehicle and even smarter driver Mike Wey, State Farm Three Drive Safe & Save programs 10% enrollment discount; up to 50% at renewal Packaged services for purchase 21

22 The Product Roadmap

23 Product differentiation Progressive Feature Focus Price Proposition 23

24 The Customer Determine the right customer value proposition for your company Behavioral Change Insurance Discounts Value-Added Services Personal and Family Security 24

25 Strategy Imperative to determine the strategy first Business optimization Knowledge creation and decision support Value Analytics Infrastructure Telematics Devices 25

26 What are the challenges? Define Goals and Design Product Legal and Regulatory Technology Infrastructure Collect and Analyze Data Use Results 26

27 Data, data, data

28 UBI data is different Consider a typical commuter 20-minute commute Twice daily commute, 5 days a week 1,200 records of data 500,000 records of data That s just one vehicle! 28

29 Example trip 29

30 What is needed for proper score development? 180% 160% 140% Expected Loss Ratio by Score Band Continuous analysis 120% 35 Loss Ratio 100% 80% 60% Number of devices 40% 10 20% 5 0% Score Decile Number devices Expected Loss Ratio 0 Collect granular data 30

31 Example: Data collected every kilometer Freeway Parking lot 31

32 Example: Data collected every minute Freeway Parking lot 32

33 Example: Data collected every second Freeway Parking lot 33

34 Granular data facilitates data cleansing 34

35 Data fuels added services for added-value and revenue-generating services Emergency call Use 3D-Accelerometer and OBD speed to detect significant impacts Use cellular connection to post an SMS with details Breakdown service Ability to trigger a Where am I? SMS message from the server, to assist a customer breakdown call Limited phone capability To pre-defined numbers for call center support Satellite navigation If linked to a PND screen in car Business trip log Distinguish business travel from personal use Vehicle wellness Theft service Detect motion without ignition start-up Tracking and call for help (in extreme implementations, disable the car) Remote safe mode activation Activates Geo-fence and other driving thresholds via an SMS message Geo-fence service Detect location outside boundary zone Trigger notification (in extreme implementations, disable the car) Notification of driving exceeding other thresholds (speed, braking) Driver feedback Real-time buzzer in car facility Reports and mapping in customer portal website Maintenance and fault diagnosis via customer portal 35

36 Privacy >70% welcome telematics to reduce their premiums Foursquare, Facebook Places, iphone, E-Z Pass, apps Sensitivity lies in the length of time the data is held Key is to provide high value in exchange for information 36

37 Conclusion

38 Takeaways Don t get left behind There s something in it for everyone Focus on strategy and data, not devices 38

39 Katie DeGraaf Chicago, IL M: