U.S. Drivers Becoming Increasingly Comfortable With Usage-Based Auto Insurance Programs
September 03 2014 - 9:05AM
Business Wire
Towers Watson survey shows the number of consumers with UBI
policy has nearly doubled
Automobile drivers across the U.S. are becoming increasingly
comfortable with usage-based auto insurance (UBI) programs, which
allow auto insurers to monitor policyholders’ driving habits with a
telematics device in exchange for potential insurance premium
savings. The number of consumers who have, or had, a UBI policy in
the past 17 months has nearly doubled, from 4.5% in February 2013
to 8.5% in July 2014, according to a new UBI consumer survey by
global professional services company Towers Watson (NYSE, NASDAQ:
TW).
“Clearly, UBI continues to gain steam in the marketplace, and
our survey results support this trend,” said Robin Harbage, global
lead for Towers Watson’s UBI practice and DriveAbility® service
offering. “Today, all 50 states have four or more personal auto UBI
programs implemented.”
Most (79%) of the 1,000 respondents surveyed said they either
would buy a UBI policy or are willing to consider the concept, and
if insurers guarantee drivers’ premiums would not rise, that
percentage increased to 88%. These percentages are virtually
unchanged from the prior survey.
While the interest level remains stable, consumers’ privacy
concerns about UBI have generally decreased over the last year and
a half. Just over one-third (35%) of respondents indicated unease
concerning insurers monitoring their driving destinations, compared
to 42% from last year’s survey.
“The high level of interest and decreasing consumer concerns
suggest the UBI value proposition is resonating with consumers,”
said Harbage. “They are becoming more and more familiar with UBI,
and like what they see. They are learning UBI can offer many
benefits, including lower monthly premiums, which outweigh their
privacy concerns.”
Nearly half (48%) of consumers still feel unease about potential
higher premiums due to UBI. This continues to reinforce popular
decisions to offer only discounts — not surcharges — based on UBI
data. “Insurers realize consumer concerns related to premium
increases can have a dramatic impact on take-up rates for UBI. In
the short term, most (if not all) companies in the U.S. have
decided to eliminate this risk by promising not to surcharge based
on driving behavior,” said Harbage.
Nearly all UBI programs in the U.S. use OBD II devices, a small
device that plugs into a port under the dash of your car, to
monitor and collect driving data. However, consumers also expressed
a willingness to use their smartphones to monitor their driving
habits. Eighty percent of smartphone owners believe it’s acceptable
to download UBI applications onto their smartphones to track their
driving, though over one-third (36%) of the survey participants do
not currently own a smartphone.
“Smartphone implementations of UBI are very appealing to many
insurance companies because they don’t require as much up-front
cost as purchasing OBD II devices. But they also come with
challenges. We have not yet seen a smartphone solution gain
widespread adoption in the U.S.,” said Len Llaguno, senior
consultant at Towers Watson. “There is a tremendous opportunity for
insurers that can figure this out.”
Consumers expressed some of their preferences for smartphone
apps with features such as automatically recording all driving
experience in the insured vehicle, confirmation of the driving
journey’s accuracy upon conclusion and periodically providing their
odometer reading.
“Ensuring you are collecting all of an insureds’ driving
experiences is a key challenge with smartphone-based programs. It
is good to see a high percentage willing to confirm the accuracy,
but it remains to be seen whether drivers will reliably and
consistently do it,” said Llaguno.
By far, the biggest issue with smartphone apps relates to
battery usage. Only 39% said a noticeable drain on battery life
that impacts daily usage would be acceptable. Consumers do
recognize some drain on battery life is necessary, with 76% saying
a modest drain that doesn’t impact daily usage would be acceptable.
Data usage is also a concern. “It’s clear smartphone apps haven’t
solved all of the issues related to collecting accurate and
sufficient vehicle operation data, and will face consumer
challenges in the marketplace,” said Llaguno.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global
professional services company that helps organizations improve
performance through effective people, risk and financial
management. The company offers consulting, technology and solutions
in the areas of benefits, talent management, rewards, and risk and
capital management. Towers Watson has more than 14,000 associates
around the world and is located on the web at towerswatson.com.
Towers WatsonJosh Wozman, +1 703-258-7670josh.wozman@towerswatson.comorBinoli Savani, +1
703-258-7648binoli.savani@towerswatson.com
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