How to Thrive in a Stagnant Auto Insurance Market – Driveway
Article Synopsis : The U.S. auto insurance market though huge ($175b) has been relatively flat in terms of real growth over the last decade. Growth at the carrier level has come mainly through acquisition.
In “How to Survive and Thrive in a Stagnant Auto Insurance Market”, Driveway makes the case for UBI telematics as an accelerant to growth. Based on findings from a study on UBI released by the National Association of Insurance Commissioners (NAIC) and the Center for Insurance Policy and Research, the report discusses the following UBI strategies:
- Strategy #1: Expanding market share – Adopting a freemium model for UBI telematics
- Strategy #2: Honing in on growth markets – Using telematics to tap new market segments such as Millennials, Seniors, Unbanked drivers, and Low-income drivers
- Strategy #3: Differentiated offerings – Personalising, incentivising and engaging with customers on a (more) regular basis via telematics
- Strategy #4: Premium retention – Using telematics to minimise risk and reduce claims costs
- Strategy #5: Taking action sooner than later – Acting on telematics to preclude marginalization in the marketplace
Most insurers think of telematics in terms of discounts only. While it’s true most if not all UBI offerings to-date have targeted discount-minded buyers, telematics can also be leveraged as a marketing tool to attract and retain higher value customers.
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Digital Insurer's CommentsTelematics transform risk from an invisible phenomenon rated retrospectively in blocks or pools to a live data feed rated and priced in real-time on a population of as little as one. UBI in private auto is merely the first market manifestation of the broader digitisation of risk. Most insurers ignore UBI for technical and/or operational reasons. Hey, why go through all the trouble, invest all that money, just to cut prices? The thing is telematics aren’t just a niche or fad, they’re the future of insurance. Carriers who invest to understand and deploy the technologies will create competitive advantage over those who don’t, in private auto and beyond.
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