How UBI could save the auto insurance customer experience

Since the beginning of the global pandemic caused by an outbreak of the novel coronavirus/COVID-19 pathogen, government-mandated or self-imposed shutdowns and shelter-in-place practices have become prevalent. This has, quite naturally, caused a dramatic shift in driving behaviors as people and organizations adapt to new employment statuses, including essential workers, work-from-home (WFH), or even unemployed.

With cars sitting idle in garages and parking lots everywhere, and as premium payments are automatically deducted monthly, policyholders are beginning to question the value in a continuous auto insurance policy. While no one is likely to turn down an offered discount or tear up a rebate check anytime soon, policyholders do appear to have mixed emotions about the recent spate of auto premium discounts being put forward due to a reduction in both miles driven and claims submitted.

Service makes the difference

While auto insurers were undoubtedly trying to do a good thing (reduce the cost burden for policyholders suffering during difficult financial times) and build good will with an existing customer base (quite literally showing the cash value of the insurer-insured relationship), unfortunately, it seems insurers may have underestimated the value policyholders today place on a top-quality customer experience. The message being sent with refunds for miles not driven is that another insurer proactively utilizing telematics technology to facilitate a usage-based insurance (UBI) program might not have charged the additional premium dollars in the first place.

This realization will undoubtedly lead many customers to shop for different insurance where more value can be assured in terms of both services for premium dollars and customer experience, as well. And, while it’s true that for the first time more consumers than ever are likely going to be considering insurers offering UBI programs, it is important to remember that not all of these programs are created equal.

The benefits of UBI

The hallmarks of good UBI programs include:

• A focus on the creation of triggers or mechanisms, which inherently increase customer engagement through proactive rewards or incentives.
• A better customer experience through well-designed products, which are responsive to policyholder habits and preferences.
• A reliance on a low-cost connectivity platform that provides speed-to-market, builds relationships, and delivers value to policyholders.

During difficult financial times, it is normal for consumers to look at ways to potentially decrease expenses, and insurance is a budget line item where the return on investment (ROI) is not always immediately obvious. And, as words like “unprecedented,” “recession,” “depression,” and “unemployment” loom large in headlines around the world, auto insurance customers are exploring all possibilities for cutting costs, including switching insurance companies, reducing coverage, or increasing deductibles.

Insurers, therefore, must work harder to create a positive customer experience and value for policyholders, which will, in turn, translate into higher levels of customer satisfaction and loyalty. In the U.S., many insurers have resisted moving to a UBI model due in large part to the limitations of legacy systems that have traditionally driven core administration functions (policy, billing, and claims), and the regulatory heavy lifting required to get new insurance products approved for sale in a multi-state distribution scenario. Fortunately, many of today’s technologies (even telematics solutions) can be easily integrated, even into a legacy environment, with open APIs. This opens doors and opportunities to insurers still not able to swallow the bitter pill of a full-on, enterprise-wide, rip-and-replace legacy modernization initiative.

Keeping in mind that this likely is the first-time many auto insurers aren’t feeling particularly recession-proof (and with good reason), it is exactly the right time to invest in the technology needed to backbone a UBI program. In order to avoid customers killing the proverbial messenger when insurers turn up to hand out premium relief or rebate checks, insurers must move quickly to adapt to a new normal in which value trumps price and modern product and engagement features overwrite the convenience of monthly premium payment debits from checking accounts.

Why telematics matter

Telematics technologies have a long history in other parts of the world, the U.K. and Italy, in particular, and when coupled with UBI programs, U.S. insurers and customers alike can additionally benefit from data insights into driving behaviors. And, as crazy as it might sound in the middle of a global pandemic, it is just possible that transitioning to UBI could save the plummeting quality of the auto insurance customer experience and facilitate a new model for the future at the same time.

Carmine “Nino” Tarantino (ntarantino@ims.tech) of CEO of IMS, the Insurance Solutions arm of TGG, which provides end-to-end solutions that enable insurers and their customers to benefit from usage-based insurance (UBI) and extract value from telematics data right across the value-chain, from customer acquisition and risk management through rewards, customer engagement, and claims.

These opinions are the author’s own.

Also by Nino Tarantino:  Value, not discounts, key to commercial lines telematics