M2M Drives UBI Forward
The example of M2M remains strong in the form of UBI (usage-based insurance). Leveraging M2M technology, such programs are making a difference in driving habits for millions across the globe, and it looks as if UBI could transform the personal auto insurance market throughout the next decade.
In the U.S., Progressive, www.progressive.com, remains in front with its UBI program Snapshot. The insurance company, which first filed for a patent on the technology in 1996, now offers Snapshot device to more than one million customers. Dave Pratt, Progressive’s UBI general manager, recently told Connected World more than one third of new customers are signing on for the Snapshot program. However, he also believes this is only the beginning of the evolution of UBI.
Indeed, the U.S. market is poised for growth. Not only is the number of UBI program subscribers growing, but Progressive, which owns six UBI patents and has several applications pending, is now licensing the intellectual property rights to its UBI technology to other interested providers. Application for licensing under certain terms is open through June 2013. Licensees cannot rate insurance based on customers' driving habits prior to April 2015, with payments commencing at that time.
Developments are happening in Europe as well. In recent months, consumers have shown interest in vehicle telematics programs, due in large part to the EU gender regulation. The regulation, put in place late last year by the European Court of Justice, prohibits insurance companies from using gender as a factor in the calculation of premiums and benefits. By using UBI technology, both insurers and drivers have a more accurate way to assess insurance rates and risks.
A growing number of European insurance companies are starting to also show interest in UBI services. Earlier this month, mobile operator Vodafone, www.m2m.vodafone.com, and service company Towers Watson, www.towerswatson.com, announced the first company to sign for its UBI pilot project. UK insurance company AIG Europe Ltd., www.aig.co.uk will be the first to run a pilot of the joint UBI solution, which includes Vodafone’s Vehicle Connect telematics solution and Tower Watson’s DriveAbility program. The UBI solution enables insurers to gather per-second interval data on customer driving performance, as well as optional features such as automated emergency calls and vehicle theft recovery—all with the customer’s consent, of course.
In addition, the service will combine granular driving data with external information such as traffic patterns and weather data to enhance the accuracy of the vehicle score. According to Duncan Anderson, global head of pricing and product management at Towers Watson, launching and maintaining a successful UBI program involves more than just sourcing a device and measuring basic driving events.
Based on the company’s experience in the U.S., Anderson says the key is analyzing granular data. This, he explains, gives a deeper understanding of driving behaviors, which in turn, gives a greater understanding of the likelihood of claims. “Indeed, we have found that our scores can differentiate loss ratio by over a factor of 10 from the best 10% of business to the worst 10%,” Anderson says.
Of course, data is only part of what is needed to bring UBI into the mainstream. Most experts agree other key issues, such as privacy concerns and the role of automobile makers, still need to be addressed before the market can truly take off. Data transmission rates also need to be considered. However, it is clear that the interest among consumers and insurers is growing—both in the U.S. and abroad—which points to a pretty bright future for UBI, thanks in part to the role of M2M.
Want to tweet about this article? Used hashtags #UBI, #M2M