In the auto insurance industry, telematics and usage-based insurance (UBI) have been a buzzing topic for several years as a means to collect driving data and offer consumers discounts and flexible policies. According to the Insurance Information Institute, nine out of ten top private auto insurers have established UBI programs. Indeed, more than three-quarters (77%) of P&C Insurance Monitor firms offer telematics and/or UBI programs.
Additionally, several flashy insurtechs, such as Root, Metromile and HiRoad, have launched competing programs to entice low-mileage drivers away from traditional policies. Since the beginning of 2020, several automakers have also announced partnerships with insurers to integrate telematics data into their vehicles, including Toyota with Nationwide, Ford with Lincoln, and Ford with Allstate. However, the use of these programs has remained relatively low despite lofty investments and aggressive promotional efforts that position the programs as ways for low-mileage and responsible drivers to save on insurance. Since the onset of the coronavirus pandemic, consumers have been staying home more often and driving less, which may impact future auto insurance needs and open opportunities for telematics programs.
Almost three-fourths (72%) of respondents in Corporate Insight’s 2019 P&C Consumer Survey reported that they “have heard of the concept of telematics before”; however, the number of those enrolled in these programs, either currently or formerly, remains much lower (22%). Fortunately for insurers, more than half (61%) of respondents who enrolled in a program said they were “satisfied” or “very satisfied” with their experiences. P&C Insurance Monitor also frequently tracks participants’ telematics experiences with leading insurers, touching base with users throughout the program to gauge both satisfaction and expectations. Our 2019 telematics report featured participants’ experiences with using Progressive’s Snapshot and Liberty Mutual’s RightTrack programs.
Even before COVID-19, insurance policyholders’ expectations for better digital experiences were on the rise. The aftermath of the pandemic, though, may influence drivers to reevaluate their insurance needs and opt for more flexible policies with lower premium costs. Insurers such as Nationwide and Farmers have already begun to seize the opportunity of higher adoption rates for their UBI programs. Farmers is waiving its 10-trip minimum to qualify for the Signal discount and allowing customers to save even if they do not drive at all this month, while Nationwide is promoting its telematics programs on its public site homepage and in a recent blog post about money-saving opportunities with UBI.
Additionally, a decrease in driving may help lead consumers to telematics and UBI programs as part of their adjustment to changing lifestyles. Arity, a mobility data and analytics company founded by Allstate, reported a 50% decrease in driving in the U.S. from mid-March to April 22. Other companies that track driving data through telematics devices, such as Farmers, Metromile and LexisNexis Risk Solutions, have reported similar numbers that indicate a nationwide decrease in driving.
According to a JD Power study conducted between March 20 and April 14, consumers’ price sensitivity when considering carriers has increased 20%, indicating that consumers who are not satisfied with their insurer’s prices may be increasingly willing to shop around for a less costly option. Most insurers are offering auto policyholders premium credits and refunds since people are driving less, but many consumers feel that may not be enough. According to JD Power, Only 37% of respondents are aware of these premium credits and refunds, and of those respondents, only 57% believe the refunds are sufficient. More importantly, those who are aware of refund credits are nearly twice as likely to shop around, cancel or switch insurers. The study also found a 40% increase in interest in trying telematics programs and revealed that over half (55%) of respondents believe their average miles driven will remain lower after the easing of stay-at-home orders.
The pandemic has opened opportunities in the telematics market, as many businesses have switched to remote work due to stay-at-home orders. Following the pandemic, several projections show that employees are likely to work from home more frequently, possibly allowing consumers to reconsider usage-based insurance if they use their vehicles less. For instance, Nationwide recently announced a permanent hybrid work-from-home, work-from-office policy for their four main corporate campuses and most other locations. Unfortunately, the pandemic has also brought over 30 million jobless claims and a faltering economy, further reducing driving and raising price sensitivities. Dan Preston, CEO of Metromile, reported that customers almost immediately saw an average of 30% savings once the stay-at-home orders came into effect, rather than having to wait or ask for traditional insurers to issue refund credits or premium reductions.
Telematics programs offer more flexibility and typically lower rates than traditional policies, giving them an advantageous edge in the post-pandemic world. Although the pandemic’s overall impact is still unknown, insurers and automakers will likely need to reevaluate their strategies going forward. With fewer consumers needing to commute, investing in robust telematics programs may become a logical option for the future.
Be on the lookout for P&C Insurance Monitor’s upcoming 2020 telematics study, which will feature participants’ experiences with Liberty Mutual’s RightTrack, Allstate’s Drivewise and Metromile. You may also contact us regarding access to our 2019 report.
Corporate Insight is closely monitoring how firms are responding to the COVID-19 pandemic. Read our continuing coverage on our company blog, and for our clients, we have launched an authenticated site section that collects all messaging across all firms we track in the following industries: Banking, Healthcare, Insurance/Annuities, Investing and Retirement.
