UBI-assets1.dxc.technology.pdfVIP

Insurance Position Paper UBI The Promise of Usage-Based Insurance Insurance Position Paper The promise of usage-based insurance The competitive landscape of the auto insurance industry is changing rapidly. Systems and staff costs are increasing, fraudulent claims are becoming more commonplace and customer experience expectations are rising. Costs of medical and property claims continue to escalate, forcing insurers to improve accident and claims data collection while winnowing out attempts at fraud. Meanwhile, pricing distortions, access to comparative pricing online, difficulty building trusted relationships and lengthy delays in claims processing have led to increasing levels of customer churn. While some insurers look upon this dynamic landscape and see only trouble, others see opportunity. New products and services are addressing the industry’s challenges: Leading PC auto insurers, for example, are increasingly leveraging telematics technology to take advantage of its benefits for their business and their policyholders. Today’s telematics technology can provide insurers with granular data based on real driving habits and behavior, revolutionizing the ability to rate risk. Instead of a traditional pay-as-you-drive (PAYD) program that merely considers self-reported miles driven, a pay-how-you-drive model (PHYD) provides insurers with detailed data on individual driving activity, as gathered by telematics devices in the vehicle. The detailed usage data enables insurers to implement usage-based insurance (UBI), creating a much more precise risk profile and more optimized policy pricing for each customer. With UBI programs, leading insurers can attract the safest drivers, provide guidance that increases safety, facilitate reward programs for good driving, increase customer engagement, and ultimately reduce risk within the portfolio of insured drivers.