How insurers can improve their usage-based insurance solutions

Adoption rates of usage-based insurance (UBI) is increasing quickly; however, there are a lot of issues with the current method of measuring this usage, according to Sentiance.

The usage-based insurance market is expected to reach $126bn by 2027, rising from $24bn in 2019, according to data from Research and Markets. This is a CAGR of 23.0%.

In a new blog post, the InsurTech claims many insurers only consider how the vehicle is handled and not other information, such as context of the trip or the behaviour of the driver. Someone driving home from a bar is going to be higher risk than someone coming home from work. That said, a workaholic who has been in the office for 14 hours will be a higher risk than the person who spent the typical eight hours at work.

In the blog post, Sentiance said, “Understanding the entire context of a user is not only important for making more accurate predictions about risk profiles, it also presents opportunities for insurers to coach their insured to become better drivers. If you want to coach drivers, you don’t just need to know how they drive; you need to understand why they drive the way they do. As mentioned in a previous post, Sentiance has developed a Behavior Change platform, enabling insurers to coach their insured to drive safer.”

There are other factors to do with distractions that should come into play. For example, what is the driver doing in the car, are they using their phone and more.

Sentiance puts the driver at the centre of its focus. It can understand a driver’s behaviours, routines and life stage and the potential risks associated with them. Its mobile-based UBI solution also tracks phone-related distractions, such as texting, calling, swiping and more.

The InsurTech claims there are five key points insurers need to take into account when designing their next UBI solutions: accuracy, privacy, transparency, user-based and cost.

Accuracy is key for UBI and these solutions need to be capable of tracking the broader context of the user. Sentiance claims AI and deep learning algorithms have become better at filling in the missing data holes mobile-based solutions used to have.

Secondly, privacy should always be a major priority for companies. Insurers should be clear with what they track and never monitor anything beyond low lever, anonymous signals produced by the sensors in mobile devices, such as location, time, speed, acceleration and gyroscope data.

Thirdly, Sentiance claims insurers need to be transparent. It claims the UBI solution providers will never know how an insurer’s actuarial algorithms work. This means they need to work with actuaries on the insurer’s side to tailor outputs from algorithms to meet the client’s needs.

The next area to keep in mind is taking a user-based approach. This means detecting which person is driving the car that time and how their risks differ from other people. By observing all trips, it can help create personalised engagement opportunities to understand the context of each journey and driver.

Finally, Sentiance believes cost is a key factor. A big appeal of these types of UBI solutions is the speed and ease they can be deployed. Most systems require a dongle or Bluetooth device, which eventually is covered by the driver in the overall costs of the system. Making this cheaper will help increase the adoption.

Read the full blog post here.

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