Consumer Reactions to Usage Based Insurance

Consumer Reactions to Usage Based Insurance Roosevelt C. Mosley Jr., FCAS, MAAA

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Usage based insurance has the potential to transform the auto insurance industry. Many insurance companies have recognized this potential and are developing and introducing UBI programs. While there are benefits for consumers who sign up for UBI, all customers have not responded positively. In this research report, we provide the results of an analysis of consumer reactions to Progressive Snapshot. These results can then be used to address key consumer issues as companies design and refine their UBI plans, thus increasing acceptance of UBI.
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Product Details

File Type: PDF
File Size: 2.31 MB
Number of Pages: 55
Language: English

Product Description

The rapid growth of data and computing power has led to many applications that impact the everyday lives of consumers. This impact is seen in many areas, including financial services, retail shopping, and even the movie going experience. One of the areas of financial services that have experienced this impact in a significant way is insurance. Insurance companies have become key consumers of “big data”, and the analysis of this data has led to fundamental shifts in the way that insurance companies design, price, and deliver products.

One specific new source of data for insurance companies that has the potential to permanently change the auto insurance landscape is telematics. Information about vehicles and how they are driven can be captured in real-time and transmitted directly to insurance companies. This allows for the most direct insight that the industry has ever had into the quality of the driver and ultimately what it will cost to insure that customer. Insurance companies have recognized the potential value of this information, and many companies are in various stages of development and implementation of Usage Based Insurance (UBI) offerings – auto insurance based on telematics information.

Although most insurance companies are embracing potential value of the usage based insurance programs, the customer reaction to these programs has not been 100% positive. There is certainly value for the insurance customer in telematics data: discounts for safe driving, information on how the insured can become safer drivers, and other additional potential services. However, to some customers these benefits come with concerns, and understanding both positive and negative customer reactions to UBI plans will be a key component of the overall long-term success and consumer acceptance of these programs.

In this research report, we provide the results of an analysis of consumer reactions to Snapshot, a UBI plan which has been implemented by Progressive Insurance. Progressive currently has the largest number of customers insured under a UBI plan in the United States and therefore has the most available information on consumer reactions. The information used in this analysis was obtained from Twitter and analyzed over a nine month period. The results from this analysis can provide insurance companies with key information on how customers are reacting to Snapshot specifically and UBI plans generally. This understanding can then be used to address key consumer issues as companies design and refine their UBI plans.

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