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Three key findings from the 'Transitioning To Usage-Based Insurance' webinar

Callum Rimmer By Bits
Callum Rimmer, founder and CEO, By Bits

Jonathan Swift, content director for Insurance Post, recently hosted the webinar: ‘Transitioning To Usage-Based Insurance’, in which a panel of experts discuss how usage-based insurance could be core to insurers while future-proofing their ability to adapt to developing vehicle technologies.

Over the past two years, policyholders have had a chance to fully consider what they pay for their motor insurance and what is fair value. This is down to a number of factors – not least vehicles have remained dormant for long periods of time since March 2020, making it easier to reflect on this ‘grudge’ purchase in the post-pandemic world of hybrid working.

Drivers are also becoming increasingly conscious about climate change messaging, which combined with the above is driving consumer demand for alternatives, with usage-based insurance becoming one significant option.

Below is a summary of three key findings discussed throughout the webinar by our panel of experts:

  • Callum Rimmer, CEO of By Bits
  • James Blackham, CEO of By Miles
  • Adam Clarke, chief underwriting officer at Ageas UK
  • Ines Feracci, director of B2B for Zego
  • Phil Ost, head of personal lines at Zurich

1) There will be more of a demand for usage-based insurance

Before consumers can begin transitioning to electric and hybrid vehicles, they will need to think more about their car usage in terms of miles and the time it will take them to get from point A to B, factoring in the charge of the vehicle, distance from the destination and journey time it will take to complete the journey.

“Usage is becoming much more at the forefront of people’s minds,” said James Blackham, CEO of By Miles. “Going forward, fundamentally, people’s usage patterns of cars have changed forever as people will be working from home more [while] travelling to the office less. So, there will be big changes happening in terms of how people are considering their usage.”

The market overall is moving towards a UBI model and, the insurance industry needs to adapt and respond to this demand. Not only are consumers becoming more aware of their usage for personal reasons, but they are also starting to consider how they can contribute towards helping the environment.

“People are looking to say, ‘How can we become greener and focus more and more on our carbon footprint?’,” commented Adam Clarke, the chief underwriting officer at Ageas UK. He continued: “UBI models allow consumers to enter this space, where it can also save them money in the long term. So, we should not forget that this is also an important factor that people [will] consider when looking to buy [motor] insurance as they [will] want good value for money.”

Looking at the commercial model space as an example, companies are increasingly leveraging telematics to optimise the total cost of ownership of their vehicles and to look at how they can reduce their fuel consumption.

Ines Feracci, director of B2B at Zego, pointed out: “UBI comes hand-in-hand with this shift as insurance could additionally leverage additional data points to better understand the risk exposure.

“If we look at all of the data points beyond the mile, the things that telematics can bring to an insurer could be integral, and it will also help us [insurers] drive more transparency alongside the risk profile to our customers.”

One thing which customers are currently craving on the market is the way in which data is used to drive and assess risk profiles versus taking the traditional and non-personalised insurance approach.

2) Subscription-based insurance models are here to stay

Is there a desire for something new beyond the standard shop around for a better policy premium on price comparison websites?

Historically, the insurance market has said there needs to be something different that engages customers. Insurers, brokers and insurtechs need to start focusing on increasing functionality and engagement across the board.

“There is a desire for something different – something beyond the usual annual shop around [rather] than having a standard policy on a price comparison website, ” explained Phil Ost, Zurich’s head of personal lines.

Therefore, the insurance sector needs to ask what else could engage customers beyond developing valuation games. “UBI is any bit of data that can be taken during the course of  a  normal 12 month motor insurance policy,” said Callum Rimmer, CEO of By Bits, pictured.

Amendments to policies can be made that will affect a consumers’ policy in both a positive and negative manner. He continued: “The real change that is happening at the moment is consumers are understanding that, should they give insurers access to their data, then they will gain a better experience [overall].

“So, while By Miles take the usage [consumers] drive and turn that into a premium, it could equally also be [affected by] whether [customers] have a certain safety feature turned on in their car, or how many seatbelts are plugged in to understand the occupancy.”

As consumers become more nuanced and allow companies access to their data, creating an ecosystem and platform different insurance products will become integral for the future of motor insurance. By taking this data and creating products that consumers want to buy, this further grants them better control over their own policies and outcomes.

With the recent Financial Conduct Authority price walking ban coming into play as of January this year, the focus of consumers will be on the value offered when searching for renewals and new policies.

“The fact that some [policies] are not necessarily going to be 12-month contracts takes [insurers] into a slightly different space: a subscription-based model,” Clarke noted. “The data you collect here will price the renewal at a much individualised and personalised basis. Therefore, the [UBI] products really do start to tick some of the boxes for the FCA, but also gives some insurers potential competitive advantages as we move forward into the post-pricing practises market.”

3) Personalisation will be a key factor considered at renewal time

“Many consumers would categorise themselves as switchers, where every year they go to comparison sites and look for someone that has a good new business offer,” Blackham added. “With this [FCA] regulation coming in, it is going to make it harder for those individuals to get the discount they are used to from switching insurers every year.”

This could mean that consumers will now become more open to looking at products they have not looked at previously, such as UBI and telematics-based policies, to further reduce their premium costs. This is where the value offering will come into play.

“The fundamental essence of UBI is to capture. This means that we have a huge opportunity to share back what we have learnt from the customers we insure,” said Feracci. “UBI ensures we are able to educate our customers by improving the trust towards insurers by feeding back the data received from their black box.”

By sharing data with customers on a frequent basis, customers will not need to reach out to insurers as much if they have a problem or a claim because insurers will be able to proactively go to customers with prevention strategies, giving them a heads up of current usage and outright behaviours that lead to certain outcomes.

“Creating visuals and easy-to-view feedback loops is vital,” said Ost. “The key here is to go beyond the data by thinking about the expanded proposition and [consider] what we can do to make the policy all encompassing.”

Insurers have a huge opportunity to engage with their customers and drive education on how to implement risk preventative measures into their day-to-day activities. Engagement and trust make a huge difference at renewal time, and by providing regular feedback to consumers and giving them access to their journey and why you have included it when calculating their premium, it will improve the chances of that customer returning to you for their insurance.

Rimmer noted: “In providing multiple points of data over the course of a year, you build up trust and clarity around how you price with real-time interaction.

“It is very important from a retention point of view. When you build that trust, people are less likely to move purely on price comparison and look to find the best experience via personalised policies.”

Personalisation is key. Having regular interactions gives insurers the opportunity to add value to their insurance product. By integrating those additional value services into the core insurance population, it makes way for increased customer retention and satisfaction overall.

To watch the webinar click here

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