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What UBI Do People Really Want?

Day two round-up of Insurance Telematics USA 2014

Day two of Insurance Telematics USA 2014 kicked off with the announcement that Zubie had partnered with Progressive Insurance. Under the partnership agreement, users of Zubie's plug-in device and mobile app will be able to use the driving data collected to potentially qualify for a safe-driver discount from Progressive. This is the first U.S. partnership for an insurer offering a safe-driving discount from data collected by a third-party connected car service provider. In addition to giving drivers feedback, the Zubie service also alerts drivers to engine problems and lets them set up groups to be automatically notified when the driver arrives or departs at common locations.

While Progressive's Snapshot program is focused on providing safe-driver discounts, David Pratt, general manager of usage based insurance, said, "Zubie has a variety of features to make driving easier, safer and cheaper. So, for customers who actually want those features and have decided to buy them, we'll make it easier for them to buy Progressive Insurance, too."

Most data presented at the conference showed that UBI has turned a corner in consumer awareness and acceptance. Sandeep Puri, head of business integration, sales and strategy for Deloitte Consulting, said his company's research shows that around 53 percent of consumers are open to telematics policies, and that Millennials are more likely than any other demographic to be telematics customers.

The big question of the event was what will make them sign up? Are discounts and cost-cutting the big lures? Or should insurers appeal to consumers' love of social media and gamification? Are value-added services the most attractive approach?

No one has the answer.

The Progressive experience

While most insurers who spoke at the conference were unwilling to disclose the penetration of UBI among their customers, Pratt was remarkably candid in his presentation. He said that more than 2 million customers have signed up for Snapshot, accounting for some $2 billion in premiums.

Only around one third of new Progressive customers sign up for Snapshot, according to Pratt, and company research found that the likely reason more don't do so is that 63 percent don't think their rates are based on the bad driving of others -- although they are, at least in part. But 89 percent would be upset if they found out they were subsidizing worse drivers. Pratt noted that, with UBI, "If you can directly measure people's driving, then they don’t have to subsidize the bad ones as much."

So, the focus of Progressive's ad campaigns continues to be explaining how the program works and clearing up misconceptions. A new TV ad, backed by print, digital display advertising, social media and direct response, will air in a few weeks, Pratt said.

Driving toward the better

That providing feedback can improve an individual's driving was validated by several speakers on day two. In just one example, Wunelli, a LexisNexis Company, did an A/B test of policyholders of the same age who were paying the same premium. One group of 2,000 got feedback on speeding; the other group got no feedback. Warning drivers about exceeding the speed limit reduced speeding by 30 percent on average, according to Paul Stacy, R&D director for Wunelli.

Stephanie Stevens, senior client executive for Data Sales at Telogis, a location intelligence platform that works with commercial clients , laid out the three key principles of driver feedback that are as relevant for individual as well as commercial drivers:

-- Make safety relevant to the mission of the company

-- Make it fun and interesting

-- Create a culture of improvement

John Kramer, director of business development for Octo Telematics North America, which is developing 10 programs in North America, said, "It all starts with the agents. If you can get your agents excited about the product and get them to understand it, you will have success."

On the other hand, lack of consumer adoption may due in part to bias on the part of insurance agents, if the agent panel was any indication. While Jeremy Jones, vice president of Covenant Insurance Group, who appears to be in the Millennial age group, told the audience that in his experience, consumers of all ages are interested in UBI, the silver-haired James Kane, senior vice president, personal Lines, for USI, a national broker, insisted that only Millennials would be interested in these programs – which he himself hasn't tried.

While insurers talked up the idea of safety and value-added services as the way to consumers' hearts, data presented by Roosevelt Mosley, principal and consulting actuary, Pinnacle Actuarial Resources, an actuarial consulting firm, told a different story. Pinnacle analyzed the sentiments of more than 5 million insurance-related Twitter posts from January 2012 to present by US consumers, and charted changes from 2013 to now.

Pinnacle found that positive responses overwhelmingly focused on savings, remaining at 76 percent year-over-year. Positive sentiment related to better driving was even lower than last year. Only 2 percent of positive tweets were about better driving, versus 4 percent last year.

Maybe the most damning anecdote about the viability of value-added services as a driver of UBI adoption came from Roger Lanctot, an associate director with Strategy Analytics. He told the audience that he'd switched out of a UBI program that had all the bells and whistles because a competing carrier offered him a traditional insurance package at a much better price.

Mobile vs. dongle

The relative value and reliability of data from mobile phones and devices that plug into the OBD II port continued to be debated on the second day of the conference. Julian Bourne, vice-President of product for Agero, a company that provides smartphone-based UBI solutions, boldly claimed that the inherent problems with using smartphones to track driver behavior – sensitivity, miscalibration and GPS errors, and difficulty in detecting trip starts and ends – had been solved.

He later recalibrated his statement a bit, saying, "Our aim is a near-OBD II solution -- and we're getting there." In Bourne's view, the benefits of a smartphone-based solution outweigh the potential data issues.

For insurers confused by vendors' competing claims about data quality, he suggested they do a side-by-side field test of various products. He suggested 30 drivers per product, tracked over 30 days, would provide the necessary proof of relative accuracy.

Tom Taylor, vice president of advanced strategy for Verizon Telematics, presented a usually overlooked point in the debate. (Verizon offers both kinds of products.) The average life of a vehicle is approximately 11 years, while a phone's is more like 18 months. Consumers definitely will change their smartphone hardware, often switching operating systems as well as brands, devices and carriers. While smartphone apps are usually thought to cost nothing to deliver to consumers, there are hidden costs, Taylor said, in getting the customer to reinstall the app on a new phone.

"If you want to take the long view, there are lots of long-term costs in keeping customer engaged on phones," he said. "The neat thing about a dongle is that it stays in the car."

No matter what the strategy or the technology an insurer wants to use, there's a surfeit of options. To make sense of it all, said Cyril Zeller, vice president of global telematics for Telit, an M2M technology provider, insurers should begin with a clear idea of what kind of product they want to offer. "Different goals determine the hardware platform and embedded software," he said. "I don't have the answers," he added, "but it's important we ask the questions."

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