UBI On the Rise for Connected Cars

11/12/2013

The ease of adding telematics monitoring devices to vehicles has resulted in the proliferation of new services. UBI (usage-based insurance) falls into this category, and more insurers are looking to add telematics-enabled offerings to their list of options. 

UBI uses collected driving data to determine premiums, and insurance companies are touting the offering as a way for safe drivers to pay less. Instead of paying a rate based on group characteristics, the rate can be tailored to driving behavior.

The number of people around the world who have access to UBI insurance options is increasing. A recent study from Ptolemus Consulting Group, www.ptolemus.com, found the number of vehicles insured under UBI policies is currently 5 million globally, of which 2.5 million are in the U.S. Looking forward, the firm estimates by 2020, UBI policies will achieve a global market share of 10%. In the U.S. this number could reach 17% market share.


In Germany, drivers will soon have a new UBI option from Sparkassen DirektVersicherung, www.sparkassen-direkt.de, an insurance provider. The company is partnering with the German subsidiary of Telefónica, www.telefonica.com, to bring a UBI option to market this month.

The option will use M2M technology based on Telefónica's Insurance Telematics service, and drivers interested in the service will have a telematics box installed in their vehicles. Data on driving will be collected and used to offer lower premiums to good drivers, and feedback on driving behavior will also be sent to users. Sparkassen DirektVersicherung stresses the fact that specifics on drivers will not be collected, and only aggregated driving scores and the number of kilometers driven each month will be sent to the insurer.

With the program, drivers will have access to additional services as well. One example is accident notification. The M2M device will notify emergency services if it detects an accident. The device can also track a vehicle in the event that it is stolen.

While the number of companies offering UBI programs has been growing, there are still challenges. In an August investor conference call, Progressive Insurance, www.progressive.com, CEO Glenn Renwick said getting consumers to engage with Snapshot (the company’s UBI program) had been a “bigger burden” than many in the company originally assumed. But at the time, the company also said its advertising campaigns around Snapshot had increased adoption.

More discussion of UBI will take place at the 2014 Connected World Conference, held Feb. 6-17 within with Chicago Auto Show. At the conference, Dave Pratt, general manager, usage based insurance at Progressive Insurance, will be on hand to present on the company’s work with Snapshot.

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