Friday, September 06, 2013
Survey: Drivers Are Receptive to Usage-Based Auto Insurance
U.S. drivers are open-minded to purchasing usage-based auto insurance (UBI) policies, or “pay as you drive” insurance, according to a new survey by Towers Watson, a global professional services company. And, they say they would change their driving habits to get better rates.
Towers Watson believes that the survey indicates UBI is gaining momentum in the marketplace, with more consumers willing to let insurers monitor their driving habits with a telematics device in exchange for potential savings on their car insurance.
“Insurers can begin thinking about de-commoditizing their products by incorporating these services into their UBI offering. They can really cater their products to the very specific needs of the market, and if done effectively, it will lead to growth and higher retention levels.”
Most (79%) respondents to the UBI Consumer Survey indicated they either would buy a UBI policy or are willing to consider the concept, and if insurers would guarantee drivers’ premiums would not rise, that percentage increased to 89%. Interest in UBI programs was highest among younger drivers (18- to 34-year-olds) with approximately two-thirds (66%) saying they would definitely or probably purchase a UBI policy. Roughly half (54%) of the participants who drive every day showed a strong interest in UBI.
Notably, 60% of those interested in UBI programs said they would be willing to change their driving behavior. This was highest among younger drivers (76%), who represent the largest risk segment. When asked how they might change their driving behavior if a UBI device were to be installed in their car, respondents listed sticking to the speed limit (71%), keeping a safer distance from other vehicles (52%) and driving more considerately (49%) as the leading adjustments.
“Clearly, there is an appetite for behavioral change features,” said Harbage. “The next big step for insurers to capitalize on this knowledge is to better understand consumers’ driving behaviors so they can subsequently develop an effective way for delivering timely and relevant feedback to the insured. This could very well have a big impact on the riskiest driver set, resulting in safer roads for everyone.”
Consumers had the chance to voice their concerns about UBI programs. Their biggest worry had to do with money, as nearly half (49%) are worried their premiums would increase. Other concerns related to privacy, such as insurers sharing consumer data (41%), fears that insurers will monitor and track driving destinations (42%), and apprehensions about insurers using data to invalidate claims (38%). “These are understandable but not material enough to prevent further UBI adoption. In fact, these concerns actually create possibilities for insurers to design better UBI products,” said Harbage.
The survey looked beyond pricing benefits associated with UBI products to gauge consumers’ interest in various value-added services that can be enabled by the technology underlying UBI devices. Drivers indicated a telling interest in a number of these services, and 72% of those interested in UBI said they would be willing to pay for them. Drivers showed most interest in vehicle theft tracking (83%), automated emergency response (82%) and vehicle wellness reports (79%).
“Consumers’ interest in UBI-related value-added services presents a great opportunity for insurance companies,” said Harbage. “Insurers can begin thinking about de-commoditizing their products by incorporating these services into their UBI offering. They can really cater their products to the very specific needs of the market, and if done effectively, it will lead to growth and higher retention levels.”
The Towers Watson UBI Consumer Survey was conducted between December 2012 and February 2013. The survey polled 7,645 respondents, including over 1,000 participants from each of seven countries: France, Germany, Italy, the Netherlands, Spain, the U.K. and the U.S. results presented above relate to U.S. respondents only.