Those who are considering moving forward have different business models to evaluate. Two dominant business models are being used in the industry today. Pay as You Drive (PAYD) typically charges a customer based on actual, documented miles driven. Pay How You Drive (PHYD) generally bases pricing on a variety of dimensions related to the driving behavior of the customer—such as rapid accelerations and decelerations, to the time of day, the routes driven, and the territories driven through. Carriers can either use installed devices and collect granular driving data themselves, or can work with a provider who sends them aggregated data—think of it as a driving score—that can be used as input to rating models.

The decision over whether to choose PAYD vs. PHYD has significant implications for carriers as it affects the technology requirements, and influences how they can utilize telematics as a service offering for their customers. If a carrier is planning to utilize an installed device, additional considerations apply such as how to distribute the device, install the device, provide customer support for the device, collect data from the device, and retrieve the device back in the event of customer defection.

A major consideration in UBI roll-out is the existence of Progressive's patent for UBI, which has been a barrier to entry for carriers. The Progressive patents are extensive, covering, “A method and system of determining a cost of automobile insurance based upon monitoring, recording and communicating data representative of operator and vehicle driving characteristics … [including] an operating state of the vehicle or an action of the operator.”

Carriers who wish to apply to use the Progressive patent must apply by the end of June. If approved, carriers will be permitted to rate customers under the Progressive patents beginning in April, 2015.

What should a carrier do during those years of waiting before they are permitted to use the data for rating purposes? Some carriers are looking at providing telematics capabilities as a customer service. They are planning to use the time to evaluate the collected data, but not use the data as an input for rating. Examples of services considered by carriers include safe driver coaching, automatic crash notification/emergency call, crash data management, stolen vehicle tracking, geo-fencing, remote access, and vehicle diagnostics.

Once a carrier has completed their strategic assessment, data management issues must be evaluated and preparations made. A plethora of data about driver behaviors may be available and a carrier needs to assess which data should be collected, stored, and used for analysis. Carriers may need new technology infrastructure to store, organize, cleanse and manage the data. Additional skill sets may be needed to take full advantage of this new data through sophisticated analytics, data mining, and modeling.

While it may be tempting to sit back and watch the UBI market rather than leap in, opportunities across the value chain exist for insurers who adopt the technology early, especially now as the main barriers to entry are falling. Insurers that wait too long potentially face adverse selection and may be left mostly with customers who don't suit their pricing model.