A new LexisNexis Risk Solutions study on usage-based insurance (UBI) found that a surprising number of U.S. drivers (50 percent) report enrolling in pay-as-you-drive policies when offered, yet few are given the choice, revealing a significant market-building opportunity for auto insurers. The 2016 LexisNexis® Usage-Based Insurance Study on consumer sentiment towards telematics-powered insurance found that just one in five consumers say they are given an opportunity to purchase a UBI policy by their insurer. UBI enrollment, in turn, has remained steady, but opportunity for growth is evident.
Key findings from the fifth annual study include:
- UBI awareness is up 10 percent
- Other approaches such as discounting deductibles may be as successful as premium discounts.
- Increased interest from consumers between the ages of 45 and 64 may offer carriers a new target market for UBI offerings.
- Word of mouth, social media marketing and customer testimonials may be needed to increase UBI adoption.
“The study revealed untapped opportunities for insurance carriers to expand UBI into markets beyond tech-savvy, price-sensitive millennials and promote the benefits of UBI with the motivators that move their specific customers,” said David Lukens, Director of Telematics at LexisNexis Risk Solutions. “New awareness-building and marketing approaches can lead to greater UBI adoption, giving carriers a better way to understand driver risk, price policies and speed the claims process. If they can capture and analyze vast amounts of driver data through telematics and analytics, they’ll be better able to differentiate and deliver improved service in a competitive market.”
Consumer Motivations for UBI
Today, discounting premiums continue to be the most popular benefits for UBI programs. Alternatives, such as discounting deductibles or offering roadside assistance, are affordable and attractive ways to acquire new UBI customers. According to the study there are also other motivations besides financial and service incentives that are proving effective. Other factors that carriers should consider when promoting their UBI programs include:
- Helping to determine fault in accidents (70 percent would be more interested in UBI).
- Monitoring good driving behavior (64 percent would be more interested in UBI).
- The technology’s ability to provide immediate notification of an accident to expedite the claims process (68 percent would be more interested in UBI).
- Receiving alerts of poor driving behavior (62 percent would be more interested in UBI).
Optimizing New Markets and Channels
While enrollment remains strongest among consumers aged 21 to 25, increased interest from consumers aged 45 to 54 may offer carriers a new untapped market opportunity for UBI offerings, according to the study. With the highest increase in awareness of UBI programs over the past year (up 6 percent), consumers aged 45 to 54 may be more interested in UBI programs due to having younger drivers in their households, triggering interest in the safety and monitoring benefits of UBI, or they may just be getting more comfortable with UBI technology.
Finally, highly influenced by others, 56 percent of respondents said they wouldn’t enroll in UBI unless consumer reviews or feedback are available. And 40 percent said they wouldn’t enroll unless someone they knew participated first, which suggests that new marketing channels such as social media, word-of-mouth and customer testimonials may also be needed to increase UBI adoption.