Introduction
The ongoing evolution of previously unavailable technologies is making waves in the auto insurance industry. For all these years, insurers have been employing many strategic approaches to address two main issues – policy premium creation by forecasting risk and claims examination for accuracy. Finally, they have become successful in addressing the issues by harnessing technologies that have made the roads safer.
Auto insurance customers expect the kind of customer service, convenient and engaging, that they have in other aspects of their daily lives. Because of this, insurers are under the pressure to focus on improving all aspects of this business, from service offerings to customer engagement, by delivering flexibility and personalization. Therefore, insurers roll out to UBI (Usage Based Insurance) programs as they are able to deliver the most satisfying customer service with dynamic pricing, payment and claims processing capabilities.
Usage Based Insurance – What is it and How it Works?
When to comes to auto insurance, customers with good driving behavior have always been enthused about the idea of “How much you drive” and “how you drive”. Because, with accurate policy customization they can save money on auto insurance premiums by getting discounts due to their low risk rate. This idea most commonly known as Usage Based Insurance (UBI) is now eminent in the industry as it attracted both insurers and the insured who are beefing about earnings and savings.
How it works; using the latest technology trend “Mobile Telematics”, insurers collect big data (varying amounts and types of data) of customers when they are on the wheel. Previous to UBI, insurance policy premiums were calculated based on the total distance driven by the customer reported by the customer himself or herself. This wasn’t helpful to predict the risk factor accurately as insurers relied on the honesty of customers and their past claims. UBI gives a much more precise insights of a customer’s driving behavior by pulling out real time information.
UBI adoption was held back in the initial days because of insurance companies who are typically conservative and adopt new trends slowly; even, there was some hesitation from customer’s side as well in terms privacy. To be successful in implementing UBI programs, insurance carriers require an opportunity to capture, score, and report on policy holder driving behavior in real-time. Carriers can do so only with Mobile Telematics.
Mobile Telematics – Usage-based Insurance Solution
The use of any wireless device to transmit data in real time from customer to an organization is referred as Telematics. In the beginning of telematics evolution, most insurers have strived hard to make telematics an integral of their business processes as there was not much support on information gathering. However, the evolution of technologies – Mobiltiy and Big Data helped insurers to recoup the much needed support to gather information and analyze it.
Before the evolution of smartphones and tablets, insurance carriers were able to track driving behavior of only those customers who have a telematics device installed in their vehicle. So, there was a need for that every customer already have, a smartphone or a tablet, to collect telematics data. Mobile Telematics systems or solutions provide an opportunity to merge telematics and mobility to effectively capture driving behavior and enable insurance carriers to engage with that data.
The concept of UBI is to develop more accurate pricing and improve claims processing by enabling better risk management assessments. For a successful implementation of UBI program, insurers will face challenges due to the explosion of real-time data in terms of velocity and variety. Mobile Telematics systems or solutions also have Big Data analytics capabilities that are poised to make waves in the auto insurance for the impending years.
