Webinar reflections: Six factors driving insurance to the fast lane of UBI adoption

Drivers, their relationships with their vehicles, and the impact of this on the insurance sector was the subject of a recent webinar, hosted on Insurance Post. With a panel comprising some of the industry’s leading figureheads, we covered several topics, most notably the rise of usage-based insurance. Indeed, this was the starting point for the webinar, which highlighted six key factors that are combining to put usage-based pricing at the heart of a considerable change within the insurance sector.

1. The increasing popularity of electric vehicles 

As soon as somebody gets into an electric car, they’re measuring the length of their journeys – drivers immediately look at how much charge they have and how many miles the journey will take.

Before making the transition to an EV, drivers must consider their usage in when, where, and how they drive to understand whether an EV will suit their needs. The fact that its adoption is becoming more widespread – EV sales increased by 186% in 2020 – means cultural acceptance is gaining traction and visibility.

2. Changing working patterns

Working patterns have changed significantly. This is unlikely to revert to type en masse, so people will be using their cars less for commuting in perpetuity. According to the National Infrastructure Commission, private car use in the UK could fall by up to 10% in the coming years if a long-term shift toward more homeworking takes hold. But when it comes to pricing, many of us have spent more time working at home, with our vehicles parked outside and drastically reducing their usage.

Yet, in many cases, people were still paying an annual premium that was not remotely reflective of the situation. It understandably made people question what they were paying for and whether a more appropriate solution was available.

3. Drive for sustainability

The messaging around sustainability is clear and the motor industry does not have a good track record when it comes to environmental or pollution concerns. While manufacturers are starting to do their bit, consumers are taking matters into their own hands. For some, EVs are out of reach from a price perspective, and have reservations when it comes to the range or the lack of ability to charge.

This group is looking at other ways to go green - this means driving less, reducing their carbon footprint and taking an active interest in fuel usage - not dissimilar to the energy meters in their homes. They want an insurance provider that can do this and the only way to do it individually and accurately is UBI. It’s a trend that will only gather pace as generations move up.

4. Better risk exposure

For insurers, many are starting to understand that UBI has a direct correlation to risk exposure. Telematics is producing a huge amount of data and this is something that will only evolve with more widespread adoption and improved technology.

This data brings huge improvements when it comes to risk profiling and transparency – way beyond age, location, and model of the vehicle. It means insurers are actively looking for ways and means of achieving this.

5. People save money

The rise to prominence of price comparison sites has done much for insurers by making it quick and easy for consumers to find and purchase a policy.

Society has been trained to shop around and find the best deal and, while comparison sites overlook and ignore a huge part of the insurance offering that is not price related. Insurers must not overlook that people want to get good value for money. They want fairness, transparency, accuracy, and a better route to premiums that are far from ubiquitous today.

6. Technology and tools

The booming insurtech market is accelerating change. the big, traditional players that would historically have had to go through timely - and costly - stages of internal processes can now bring in tech-native and nimble scale-up companies that specialise in addressing the problems they’re trying to address. These companies can build tailored solutions in weeks and can showcase results quickly - this is key in gaining trust and appetite from other areas of the business from the traditional player. When return on investment is being delivered, the desire to expand the partnership and look for other solutions becomes quicker and more frequent and the process creates a cycle of perpetual improvement.

UBI is here to stay

This was just the tip of the iceberg in terms of what was covered in the webinar, which is available here to watch on-demand. But the panel was in no doubt that while change in the insurance sector is constant, one element that is here to stay is UBI.

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