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Will Usage Based Insurance (UBI) disrupt the insurance industry?


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Short introduction to UBI presented during the 1st Fintech Summit in Brussels.

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Will Usage Based Insurance (UBI) disrupt the insurance industry?

  1. 1. Mateusz Maj Evangelist & Marketing Actuary Insurance 2.0 through AI & Engagement Mateusz Maj Evangelist & Marketing Actuary VivaDrive INNOVATE OR NOT TO INNOVATE … AND DIE? Will Usage Based Insurance (UBI) disrupt the insurance industry?
  2. 2. THE FOURTH INDUSTRIAL REVOLUTION Artificial Intelligence, robotics, IoT, uber- connectivity, quantum computing, …
  3. 3. INSURANCE SECTOR Will Auto Insurers survive their collision with new industrial revolution? No brand loyalty U.S. auto insurance brands spent ~$6 billion on marketing with no improvement i.e. stagnant premium growth and very low NPS score. High acquisition cost Acquisition costs of 10-15% of expected Lifetime Premium – €500+ on the high end. High retention cost with no guarantee on returns Still insurers focus on acquisition rather than retention, while attracting a new customer costs five times as much as keeping an existing one. Low profitability due to high claims Claims constitute up to 90% of insurers’ costs. Commoditization = price wars Every insurance brand sounds the same and they differentiate on price only. They all consider Google a potential rival.
  5. 5. 1980s Now Profession Engine power Coverage Bonus-malus Coverage Bonus-malus Claims history Traffic violation history Age of vehicle Use of vehicle Make of vehicle Purchase price Parking place Occupation No. of drivers Age of drivers Maritial status Real estate Driving license Mileage Registered owner Credit rating … Do we need additional factors? Is something new and better necessary? AUTO INSURANCE – RATING TRENDS
  6. 6. AUTO INSURANCE – USAGE-BASED-INSURANCE (UBI) – THE NEW NORMAL? UBI is the new insurance scheme where insurance premiums are calculated based on driver exposure and/or behaviour taking into account mileage, speed, driving dynamics among others.
  7. 7. AUTO INSURANCE – UBI BENEFITS Insurer Insured Better risk assessment Discounted premium Positive selection of good drivers Safer driving Improving customer-insurer interaction Additional services like roadside assistance Risk reduction through better driving Does it work and does it offer enough value for insurers and the insured?
  8. 8. AUTO INSURANCE – UBI BEST BEST PRACTICES - ITALY 4.8M Information from Matteo Carbone – Bain & Company 26 16% Black-boxes fitted in cars Insurers offering UBI Penetration rate 40% Best practice best penetration rate on the market BUT •  UBI is semi-compulsory – every insurer needs to offer an option of UBI •  Italy is a high insurance rate country – possible to reach a positive business model •  Does not work elsewhere - the existing business model of UBI does not present enough value, neither to the insurance company, nor to the end customer
  9. 9. AUTO INSURANCE – WORKING EXAMPLE – VITALITY DRIVE •  Provides a tangible value through rewarding system (drive well, earn points & exchange them to rewards); •  Viable business model through successful ecosystem with multiple partners, where rewards are offered by partners; •  Vitality program – foundation of a business model making Discovery (former startup) a global player with $8 bn market cap.
  10. 10. VIVADRIVE Make your own Vitality program VivaDrive is a Platform-as-a-Service (PaaS) solution that a) analyses driving data; b) discovers insights about the driver and provides personalized feedback to the driver; c) uses gamification with a rewards program to change driving behavior d) builds a loyal community. VivaDrive is bringing to the insurance industry lower customer acquisition and retention cost, brand loyalty improvement and claims reduction.
  11. 11. SOLUTION VivaDrive - community-driven magic formula Stay away from ‘price wars’ and focus on more efficient ‘value wars’ 1. PROFILING & FEEDBACK Use our personal driving coach and have all the insight to become a better driver 2. GAMIFICATION & REWARDS Driver engagement through game dynamics & personalized rewards 3. COMMUNITY Connect with other drivers. Share personal experience. Benefit from the community.
  12. 12. CONNECTED CAR Integrate with connected car platforms CAR/RIDE SHARING Offer policies to new sharing economy initiatives TELECOM PARTNER Reach out to large user-base and link your app with a telecom bundle FLEETS/LEASING Engage corporate communities ROADSIDE ASSISTANCE VAS - Remote roadside assistance service CREDIT CAR PARTNER Pre-paid loyalty card Collaborative business model through coalition loyalty program boosted with AI & personalization LOYALTY PLATFORM Share costs with loyalty partners GOVERNMENT & NGO Independent prevention platform that unlocks a new acquisition channel 8 1 2 3 4 5 6 7 USE CASE VivaDrive – make your own successful ecosystem
  13. 13. Mateusz Maj Evangelist & Marketing Actuary 0032 494 899 891 0048 786 212 481 VivaDrive Pr. Roger van Overstraetenplein 2, 3000 Leuven 0032 484 899 891