E&Y data shows that over 88% of all new cars produced in 2025 will carry a pre-installed telematics system. The automobile manufacturers, insurers, and telematics technology leaders stand to benefit from that development. That trend towards 2025 shows a more important undercurrent – robust and growing consumer demand for more accurately-priced and affordable insurance products.
As per data published by the Associated Press, 75% of consumers in the U.S. want an insurance product that migrates from the legacy risk calculation metrics, which use demographic data, vehicle information, and credit score to determine the risk premiums an insured customer pays. Instead, they wanted a more accurately-priced insurance product that pays attention to their driving patterns and uses that as the benchmark to determine their risk profile.
The other side of the equation shows how the consumers have been reacting to being offered a UBI product. The same AP dataset showed that over 50% of customers accepted the offer when their insurer wanted them to shift to a UBI platform. Since it is already a known fact that UBI can help in mitigating payout risks for the insurer, the insurers have to nudge the consumers to shift to a new product, and over half of them would be happy to do so.
While it may seem that the cost of adopting telematics technology can be too high, given the prices of IoT devices, sensors, and accompanying software, such overheads can be easily avoided using mobile apps. 64% of the consumers included in the earlier-mentioned dataset were eager to try mobile apps that contributed analyzed their driving and helped them get a preliminary understanding of their risk profile, as far as it came with a free trial.
What is Driving the Demand for UBI Products?
Both the industry and the consumers are seeking usage-based insurance products that can help their particular interests. But, drilling a bit more into this inherent need can unravel themes that can optimize insurance products precisely as per consumer needs. As the UBI market grows at a CAGR of 29% over the next six years, as forecasted by Acumen Research, these themes will start emerging as the inherent drivers of consumer demand for UBI:
1. 83% of Consumers Prefer an Insurance Product That Protects Their Family on the Road.
The AP-data highlighted a critical insight – insurance products have a direct impact on the family of the insured, as well as the insured person. While that insight barely affects the pricing of risks in insurance products, it is an essential factor for consumers. Earlier, there was not much that insurers could have done to satiate this need. Some insurers provided on-demand vehicle repair in case the insured customer faced a problem. But, that was the limit of leveraging this insight.
With telematics and UBI products that use Kruzr, the scope of building on that insight has evolved. Kruzr collects more data than most of the other telematics platforms. This is critical because a driver is not a standalone entity existing on the road. Several other conditions contribute to the risk associated with the driver and the car. Some of these factors include weather data that can have a direct impact on the car’s performance or on-road visibility, traffic & congestion, which can lead to nudging riskier driving behavior as individuals try to recoup the time lost in the traffic, and navigation data that suggests risk-prone driving zones based on historical data.
Most of these data-points are publically available from reliable sources. Kruzr aggregates all this data and integrates into providing the driver with real-time advisory on what forms of risks are deterministically forecasted if she/he takes a particular route at a specific time. This seemingly little add-on can help drivers make more informed decisions about their real-time risk profile, especially when they have family members accompanying them.
2. 53% of Consumers Have No Problem in Sharing Driving Data with Telematics Platforms.
Privacy has emerged as a significant concern for many consumers, even outside the insurance industry. Common wisdom suggests that people want increased privacy or control over who gets access to their data.
The AP report states that more than half of the consumers in their dataset had no issues sharing their driving data with the telematics platforms. This makes intuitive sense as drivers who can see their insurance premiums drop with safer driving practices nudged by tips & real-time suggestions given by platforms like Kruzr would establish the causality between sharing the data and getting more affordable insurance.
The role of privacy comes into highlight when compliance becomes a key consideration for the insurers. GDPR is probably one of the most remarkable sets of regulations that emphasized the consumers’ right to data protection. Interestingly, even if an insurance provider is not in the European Union but is serving the EU citizens in any form, the insurer would be subject to GDPR policies. As far as the insurer uses products like Kruzr, which are compliant with these guidelines for collecting, processing, and storing the data, the insurer’s cost of compliance gets notably reduced.
3. According to a Published Study, 25% of Millennials Use Telematics Data to Improve Their Driving Style.
The AP-report also substantiated a use-case for UBI and telematics data – improving driver performance. While precise data show safer driving can reduce claims by up to 20% for the insurer, from the driver’s standpoint, this is becoming one of the critical themes why millennial consumers would be more accommodative to UBI.
For the insurers, focusing on pricing the risk might be the primary objective. But for the drivers, avoiding a crash and improving the driving style is more imperative. That is the crucial reason why one-fourth of millennials are open to using UBI for improving their driving skills.
The infrastructure, data, and technology are already in place to achieve this. Kruzr collects several data-points in a drive and aggregates to assess the risk-score pertinent to the driver. Along with this, as soon as the driver is moving into riskier territories, the Kruzr mobile app can give audio-based nudges that alert the driver to shift to a safer driving style or route. This real-time feedback mechanism is non-intrusive as it does not make the driver move her/his focus away from the road and on to the screen while still providing feedback just when it is essential.
The non-intrusive nature of driving nudges is a crucial feature. Many consumers are under the false perception that focusing on the screen to see real-time tips on safer driving can distract the road and defeat the purpose.
4. 57% of Respondents to a Willis Towers Watson Survey Witnessed a Drop in Their Insurance Premiums, After Shifting to UBI.
The study highlights a key benefit that many consumers are looking for – lower insurance premiums. From the insurer’s perspective, the focus is on providing more accurate risk-pricing. And that is where the data from the Willis Towers Watson study stands out.
Suppose 57% of consumers have witnessed a drop in their payable insurance premiums. In that case, it means that the same amount of consumers were being charged higher premiums before the UBI program was offered to them. While many consumers might have stayed with higher premiums, there must have been some consumers who chose a competing insurance product with lower premiums. Mispricing risk can lead to a loss of potential revenue opportunities for the insurers.
Kruzr solves this problem by using the Kruzr Safety Index. The platform has been engineered to pull data from several resources to get a more comprehensive and timely understanding of driver-risk. It can make insurance pricing more accurate and provide fairer premiums to consumers. 49% of consumers from the same survey stated that they sought greater control over their premiums. This shows that a large proportion of consumers would be happily responsive if the insurance premium calculations are shifted to a more accurate telematics platform, like Kruzr.
In Conclusion
While telematics and UBI have a significant value proposition for consumers and insurers, the market is yet to adopt them as the key categories in auto insurance fully. Several reasons like the complex relationships between automobile manufacturers, insurers, and consumers, the concerns on privacy issues, and the lack of accuracy in the underlying technology have contributed to this sub-optimal adoption.
Kruzr can serve as the platform that unlocks value in this ecosystem. Aggregating data from multiple sources, applying the right perspective to calculate the risk scores, and providing real-time feedback for proactive measures are just some of the features that can help the insurers and the consumers overcome the barriers to increased adoption. To know more about how Kruzr can help you offer more accurate UBI products that capitalize on the growing demand by satisfying consumer expectations, click here.