If you have never heard of the term telematics or Usage-Based Insurance, then you have probably at least heard of GPS, which can be found in many cars these days. GPS, or global positioning system, is a way of using satellite technology to track and guide vehicles. Telematics is a way of using GPS and Internet technology to make companies more efficient and customers much happier.
What is UBI
Usage-based insurance (UBI) is the process of tracking your mileage and driving behaviors through a technological device you self install into your vehicle. UBI could also be pre-installed into vehicles by the car’s manufacturer or be provided through mobile apps. UBI’s can give insurers a better understanding of your driving behavior to best pair behaviors with premium insurance rates. Progressive Insurance lead the industry in the 1990’s being the first to utilize usage-based products. Now many companies are using these products to determine premium rates for customers.
Advantages of using UBI
Since the COVID-19 outbreak, there has been a reduction in miles driven that could lead to a reduced risk level for Auto Insurance of up to 53%. The differences in reduction will be due in part to the phased implementation of transport restrictions and in part due to the community understanding of these restrictions.
The reduced exposure is driven mainly by reduced active users rather than trips per user, miles per trip, or user driving behavior.
Based on precisely how a policyholder uses his or her car, UBI generates a premium. True UBI means that with shorter periods between price changes, such as monthly or even weekly, the premium will go up or down depending on usage. This is not a new concept; some firms are already implementing these kinds of policies.
But now is the time to look at full-scale adoption to help fight the unexpected, establish customer transparency, and lower carrier rates.
A few months ago, nobody could have predicted such a massive shift in commuting patterns. With so many individuals enjoying the lifestyle of work-from-home, it is fair to believe that post-COVID-19 will become more popular. UBI offers the ideal solution for broad paths of the workplace performing variable commuting by changing rates as policyholders’ drive, which can also provide flexibility in periods of irregular mobility patterns for car insurance providers.
Policyholders do not understand how their premiums are created at the best of times. UBI is intended to provide policyholders with data on their driving habits and their effect on their premiums. Transparency and awareness have been integrated from the outset into UBI policies, minimizing policyholders’ uncertainty about information.
A new modern tool for today’s drivers
It’s not easy to introduce a new strategy and rating system, and carriers have other issues to face right now. But this is the perfect time to begin thinking about implementing UBI on a much larger scale, given the lifestyle changes that are sure to come from current events.
Telematics solutions are ready to provide the carrier with the necessary data and feedback to encourage the policyholder to allow variable pricing and give drivers some additional transparency and control.
If you’re curious about transitioning to Usage-Based Insurance feel free to contact us.