What 1,500 US drivers told us about telematics insurance

Two-thirds of US drivers without a usage-based insurance (UBI) policy say they would share their data for a discount, and 3 in 4 UBI customers say they already receive one. Our survey suggests that the payoff does not end with that discount.

Privacy is the standard objection to telematics insurance. Our survey of 1,500 US auto policyholders suggests it is a smaller barrier than is often assumed.

Even among non-UBI policyholders – who do not currently share their vehicle data with third parties– 67% said they were very likely (27%) or somewhat likely (40%) to share it with an insurer in return for a discount. Only 12% said they were unlikely to, roughly one driver in eight.

The discount is real

Obviously willingness is one thing and satisfaction another.

Among the UBI policyholders in our sample, 76% said they pay less than they did with their previous insurer, 23% pay about the same and only 1% pay a surcharge. These are current policyholders, so anyone who was surcharged and left is not in the sample. Even so, most drivers who say yes to telematics are rewarded for it. The size of the reward is another matter: about half of those with a discount (51%) put it at 10% or less, while 52% of drivers without UBI say it would take more than 20% to win them over.

The pull is price. US auto insurance buyers are highly sensitive to it, particularly in a high-premium market and after a long run of premium rises. A product that lets a driver earn a lower premium by showing how they drive is an easy one to sell, which is part of how insurers such as Progressive have used UBI to grow profitably.

Awareness remains a bottleneck. Only 14% of drivers without UBI say they are very familiar with it, against 63% of those who have it. Four in ten non-users (40%) would consider a programme at their current insurer, and another 31% are undecided.

Customers also think better of their insurer

Winning the customer is only half of it. Of all UBI policyholders, 72% said the programme had improved their view of their insurer, and 32% said it had improved it very much. Only 3% felt less favourably.

UBI customers are also more satisfied: 53% said they were very satisfied with their insurer, against 38% of customers without UBI, and 80% would recommend UBI to others.

Loyal to the product, not yet to the insurer

Satisfaction carries through to renewal. 85% of UBI policyholders said they were likely to stay on UBI at their next renewal, and half (50%) would move to another insurer to keep it if theirs stopped offering it.

But that loyalty is to telematics more than to the insurer: UBI customers were more likely than others to say they might switch insurer in the next 12 months (29% vs 18%). Price is the trigger: 53% said rising premiums despite safe driving would make them stop using UBI.

Beyond risk selection

Telematics business cases are usually built on risk selection and claims reduction, and the survey supports that too: a third (34%) of UBI customers say they now drive fewer miles.

It also adds two commercial arguments: UBI helps win price-sensitive customers, and it makes them happier with their insurer. Turning that goodwill into retention depends on the discount keeping pace with what customers expect. For an insurer weighing the cost of running a programme, all of this belongs in the design (and fine-tuning) of the telematics programme.

Find out more

To access the detailed results of the survey, download the UBI Global Study’s abstract, or contact me to discuss the full study. This survey was conducted among a representative sample of 1,500 US policyholders last year. The sample is representative of US policyholders by geography, socio-economic profile, age and gender.

Article written by Alex Tallon, under PTOLEMUS copyright

PTOLEMUS intellectual property. Feel free to use it by quoting PTOLEMUS Consulting Group as the source.