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Ubi Insurance Telematics

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  • Coverbox is the marketing name for Wunelli LimitedRoyal & Sun Alliance markets through MORE TH>N under the trademark Green WheelsItaly (AXA, Allianz, RealeMutua, Sara, Unipol and Aurora/Linear, Lloyd Adriatic)Hartford; WSJ – 6/26/08Milemeter launched in TX in NOV08
  • GMAC (34 states)Uses on-starRates -54% to -5% discounts based on mileageOther services available via on-starProgressive MyRateSelf-installed Xirgo deviceRates -61% to +9% based on time, distance, and behaviorTravelers IntelliDriveProfessionally installed, requires $100 and 12 month committmentParticipation discount, rates will vary depending on mileageOffers teen monitoring and vehicle locatorCSAA uDrive launched in NV in 2010
  • heavy drivers can still earn a 5% to 8% "safe driver" discount just for subscribing to the service
  • IntelliDrive Brochure
  • CSAA uDrive website
  • Transcript

    • 1. Insurance Telematics Survey - http://www.surveymonkey.com/s/3LHVQLY
      Please take 10 minutes to complete our survey on vehicle insurance telematics.
      To take the survey please click here.
      Once you've completed the survey, you’ll have access to two exclusive presentations on Capitalizing on Opportunities in Usage Based Insurance, and Capturing Data to Produce Useful Information for Insurers.
      As a further thank you for your help, we would also be happy to provide you with selected findings from this survey, once we have collated and analysed the data.
      The survey can be filled in anonymously.
    • 2. Usage-based Insurance: How soon? How fast?
      Insurance Telematics 2010
      Robin Harbage
      C-Counsel Consultant
    • 3. Agenda
      Who is EMB?
      Insurer timescales and plans
      Lessons from pilot products
      UBI pricing options and business models
      © 2009 EMB. All rights reserved.
      Slide 3
    • 4. © 2010 EMB. All rights reserved.
      Slide 4
      Introducing EMB
      Leading independent consultancy for P&C insurers
      More than 300 employees in 12 countries in 6 continents
      6 US offices; over 35 employees
      Software and consulting are an important part of our services
    • 5. EMB Consulting facts
      EMB consultants expertise gained over many years in the industry
      Blend global best practices with local knowledge
      Clients span the spectrum of companies
      Personal and commercial
      Small specialists to the very largest companies
      © 2010 EMB. All rights reserved.
      Slide 5
      EMB has consulted with 28 of the top 30 global P&C companies
    • 6. EMB Software facts
      EMB has sold over 3,000 licences worldwide to over 500 clients
      Over 80% of theworld’s top 50 P&C insurance companies
      9 of top 10 US auto insurers
      19 of top 20 UK auto insurers
      Over 55 companies in US, including small specialist companies
      Tremendous support/development
      US consultants (who use the products) handle support
      50 developers / consultants and millions of dollars dedicated to software development each year
      © 2010 EMB. All rights reserved.
      Slide 6
      EMB is the leading producer of actuarial software
    • 7. UBI TIMELINE
      © 2008 EMB. All rights reserved.
      Slide 7
    • 8. Consumer reaction positive
      © 2009 EMB. All rights reserved.
      Slide 8
      UK survey found 63% of consumers declared strong interest in an insurance program to encourage safe driving
      Response is 90% positive for monitored safe driving discount when including “possible interest”
      Consumers overwhelmingly indicate an understanding and acceptance of the link between driving behavior and premium
    • 9. Regulators largely support UBI
      © 2009 EMB. All rights reserved.
      Slide 9
      Unlike many innovations, regulators view positively
      “Fairly” discriminatory
      Saves lives
      Environmentally friendly
      Addresses affordability issues
      Easily understood
      EMB has experienced very positive reactions when introducing usage-based programs to the US market.
    • 10. State Climate Action Plans
      14 states explicitly include PAYD insurance in their climate action plans
      AZ, CA, CO, MA, MD, ME, MN, NH, NM, NC, PA RI, VA, and VT
      © 2009 EMB. All rights reserved.
      Slide 10
    • 11. Monitored Driving Programs
      Hollard – SA
      Uniqua – Austria
      WGV - Germany
      AXA – France, Ireland, Italy
      Allianz – Italy
      Lloyd Adriatic – Italy
      RealeMutua – Italy
      Sara – Italy
      Polis Direct - Netherlands
      MAPFRE - Spain
      InsureTheBox – UK
      Royal & Sun - UK
      Coverbox – UK
      AIOI – Japan
      Real Insurance – Australia
      Aryeh - Israel
      Aviva – Canada & Europe
      Progressive – US
      GMAC - US
      Liberty Mutual– US
      American Family – US
      Milemeter – US
      Travelers – US
      CSAA - US
      Unigard – US (pending)
      © 2009 EMB. All rights reserved.
      Slide 11
    • 12. © 2008-2009 EMB. All rights reserved.
      Slide 12
      Telematics Timeline
    • 13. Important Questions
      What are insurer needs to get started in UBI?
      What are critical telematics functions for now, near term and long term?
      What can insurers afford to pay for an economic telematics product?
      What data is pertinent?
      Is the data accurate?
      How much data is required and when?
      How to transfer, store, and analyze all this data?
      What do consumers want?
      © 2009 EMB. All rights reserved.
      Slide 13
    • 14. LESSONS FROM UBI PROGRAMS
      © 2008 EMB. All rights reserved.
      Slide 14
    • 15. Then and Now
      Early pilots used professionally installed OEM or after-market devices
      Subsidized cost for learning
      Inconvenient for consumers and low adoption rate
      Multiple electronic makers offering devices
      Device costs are declining
      Reliable self-installed devices are available
      © 2009 EMB. All rights reserved.
      Slide 15
    • 16. Who is doing what in usage-based insurance (UBI)?
      © 2009 EMB. All rights reserved.
      Slide 16
      Notable Programs
      Several UBI business models exist
      Many other companies, including small companies, are moving toward implementation
      Liberty Mutual
      MileMeter
      GMAC
      Verified Mileage
      Safety Services
      CSAA
      Travelers
      American Family
      Behavior Rating
      Progressive
      Aviva
    • 17. Progressive’s SnapshotSM
      Optional program with customer selecting which vehicles to enroll
      Wireless device plugged into OBD II port records “how, how much, and when the car is being driven”
      Device may be used for test period then discount applied until next endorsement
      Significant discounts may apply for all major coverages
      Approved in 23(+) states
      © 2009 EMB. All rights reserved.
      Slide 17
      Game-changing program maturing and growing.
    • 18. GMAC Mileage Discount
      Only available to OnStar subscribers in 35 states
      Odometer readings sent from OnStar to GMAC with subscriber’s permission
      Average initial discount of 26%
      High mileage receive 5% discount for subscribing
      Source: The Plain Dealer - July 17, 2008; WSJ - June 26, 2008
      © 2009 EMB. All rights reserved.
      Slide 18
      Self selection is real.
    • 19. Travelers IntelliDriveTM
      Discount for participation
      Mileage used for rating
      Data used for research
      Additional services
      Teen monitoring
      Vehicle locator
      Driving info at secure website
      Initially required professional installation
      Minimum 12 month, with $100 fee for early termination
      © 2009 EMB. All rights reserved.
      Slide 19
      Difficult to get traction with professional installation.
    • 20. CSAA uDrive™
      Available in Nevada
      Discount up to 10% per vehicle for participation
      Up to 5% additional savings at renewal under 10k miles
      Information on driving habits via personalized website
      © 2009 EMB. All rights reserved.
      Slide 20
      The number getting into the game is growing.
    • 21. Hollard in South Africa
      Includes a minimum fixed premium and a variable premium based on the mileage of the vehicle for the specific month
      Fixed premium includes coverage for at least 417 kilometers, a GPS tracking device, and non-collision losses.
      Extra mileage is subject to a ‘small tariff’ per kilometer
      “You can thus control how much you spend on vehicle cover premiums.”
      Source: www.payasyoudrive.co.za/articles/cheap-car-insurance.html
      © 2009 EMB. All rights reserved.
      Slide 21
      Consumers appreciate the control.
    • 22. UBI PRICING REVOLUTION
      © 2008 EMB. All rights reserved.
      Slide 22
    • 23. How does UBI work?
      © 2008 EMB. All rights reserved.
      Slide 23
      Driver
      Customer Feedback Loop
      Improve Driving
      Feedback
      Policy Period
      Market
      Quote
      Collect & Analyze
      Company Feedback Loop
      Improve Rating
      Driving Score
      Underwriting
    • 24. Appeals to participating consumers
      © 2009 EMB. All rights reserved.
      Slide 24
      Once educated, UBI appeals to consumers
      Makes sense
      Controllable
      Side benefits
      As it is causal, reduces reliance on risk proxies
      Insurance credit scores
      Driver assignment
      Charges for relatively rare accidents, convictions
    • 25. Tremendous predictive power
      © 2009 EMB. All rights reserved.
      Slide 25
      Various studies demonstrate predictive potential
      Companies gain competitive advantage through better segmentation
      Elimination of cross-subsidization is more “fair”
    • 26. © 2008 EMB. All rights reserved.
      Slide 26
      http://paydpilot.ca/
    • 27. © 2009 EMB. All rights reserved.
      Slide 27
      Reducing Risk Cost with Telematics
      Claims Effectiveness
      HOW? WHERE? WHEN?
      Non-fraud
      Self-selection
      Safer drivers
      Risk Segmentation
      HOW? WHERE? WHEN? HOW MUCH?
      Risk Influence
      HOW? WHERE? WHEN? HOW MUCH?
      Risk Segmentation
      Deriving risk factors from the data, and applying loadings / discounts to customers to enhance selection
      Risk Influence
      Customer feedback on behaviours to avoid
      Reducing Vehicle usage overall, and especially higher risk miles
      Claims Effectiveness
      Informing the claims process
      Use of telematic data as evidence
      Self Selection
      Reducing underwriting and claims fraud
    • 28. Improves driving and reduces accidents
      © 2009 EMB. All rights reserved.
      Slide 28
      UBI experience significantly better
      Early adopters will have increased profits and a competitive advantage
      Norwich Union: 30% frequency reduction
      GreenRoads: 54% improvement in fleet crash rate
      Iceland postal service reduced crash rate by 56%
      Pepsi (Iceland) reduced fleet crash rates by over 80%
      Several UBI discounts > 50%
    • 29. © 2009 EMB. All rights reserved.
      Slide 29
      Added Value Services
      Safe Driver Coaching
      In vehicle feedback
      Web site reports
      Emergency Call
      Detect significant impacts
      Send text alerts (“Where am I” message)
      Real-time service to dispatch help
      Theft Service
      Detect motion without ignition
      Tracking and call for help
      Geo-fence Service
      Detect location outside boundary zone
      Trigger notification
      Subscription services could help subsidize the costs
    • 30. Data Uses
      Data needed for loss cost models
      Data consumer wants
      Data for additional services
      © 2009 EMB. All rights reserved.
      Slide 30
    • 31. © 2009 EMB. All rights reserved.
      Slide 31
      Business Application
      ImpactSensor
      ImpactEvent
      CrashData
      RiskAnalytics
      RefuteClaims
      ClaimsHandling
      AccidentResearch
      EmergencyAssistance
    • 32. © 2009 EMB. All rights reserved.
      Slide 32
      Alternative Models
      Dedicated Device
      Insurance pays for device and install
      Need self install to appeal to mass market
      Reasonable cost
      Ease of use
      Shared Services Device
      Device is able to support added value services outside insurance for example
      Satellite Navigation
      Rerouting to avoid Traffic Congestion
      Theft Tracking
      Speed camera warnings
      Emergency Call etc.
      OEM or hard install may be required for these
      Technology will change, but data is critical now to get a foothold.
    • 33. What does this mean?
      © 2008 EMB. All rights reserved.
      Slide 33
      Devices can track simple or very detailed driving behavior
      Significantly increase pricing accuracy
      Minimize reliance on detailed questions and controversial proxy variables
      Help customers understand and eliminate risky behaviors
      Differentiate product offering via additional services
      All this means increased profits and retention!
    • 34. UBI is a significant advantage for early adopters!
      © 2008 EMB. All rights reserved.
      Slide 34
      If provide feedback to drivers, can drive the costs down even lower to increase advantage
    • 35. Why now?
      © 2009 EMB. All rights reserved.
      Slide 35
      There a numerous reasons why UBI is gaining momentum
      Technology costs have dropped
      Predictive power significantly enhances accuracy of prices
      Participating consumers love it
      Accident reduction potential
      Politically accepted
      Retention dramatically increased
    • 36. Contact Info
      © 2008 EMB. All rights reserved.
      Slide 36
      Robin Harbage, FCAS MAAA
      C-Counsel Consultant
      EMB America LLC
      622 Falls Rd
      Chagrin Falls, OH 44022
      Robin.harbage@emb.com
      (440) 725-6204