The following is an opinion article written by Seth Birnbaum, CEO of EverQuote.
While the insurance industry was once slow to innovate, it is now evolving rapidly with advancing technology, changing consumer preferences and emerging new practices. Some people consider the alterations to be simple improvements, while others view them as entire disruptions to the industry. Regardless of your perspective, however, there is no doubt that they are transforming the way the industry operates.
Over the next two days, we’ll look at five things you can expect from the insurance industry in 2017 – beginning with two points today and the remaining three tomorrow.
Increased telematics and usage-based insurance options
Usage-based insurance is expected to increase globally, from 12 million to 142 million customers, in the next seven years. In 2017, insurers will likely expand their usage-based insurance (UBI) options to match consumer preferences, adapt to the Internet of Things and take advantage of previously untapped opportunities. Consumers are also likely to gain more control of their information.
Currently, 50% of the consumers offered UBI decide to enroll. However, only one in five consumers report being offered usage-based insurance at all. UBI offers benefits to all involved as the offerings will save providers money with more accurate driver profiles through telematics and offer value to consumers with more personalised services and discounts.
Consumers who have previously been frustrated with how traditional car insurance operates on generalisations about age and location may be happier to have more control over their premium as it will be influenced by how they drive. Careful drivers may see premium discounts of 15% or more. Drivers that aren’t ready to share their driving information with car insurers can first measure their skills with independent safe-driving apps such as EverDrive, built on Cambridge Mobile Telematics’ DriveWell platform, before allowing insurers to access their driving data.
Additionally, insurers will likely develop more value propositions for UBI this year. Providers may choose to market other incentives for UBI - such as improving young drivers’ safety, reducing carbon footprints or improving overall efficiency while driving. One study found that the majority of drivers would be more interested if UBI helped to determine fault in accidents (70%), initiated the claims process (68%) and monitored or coached consumers on improving their driving behavior (62%). In 2017, car insurers may also grow partnerships with new information sources, such an independent apps and risk marketplaces.
Consumers may leverage this opportunity to gain more control over their information. By using a partnered app or a risk marketplace, consumers will be empowered and able to choose when they want to share information with insurers. Many people already enjoy monitoring themselves through personal tracking, a self-measurement movement known as the “Quantified Self” and they will now be able to use that information to receive fair and personalized pricing through usage-based insurance.
Bring on insurtech
Investments in insurtech were at an all-time high at the beginning of 2016 and while the industry is still considered to be in its infancy, we can expect it to further intersect with car insurance as time rolls on.
In 2017, more car insurers will take steps to adapt to insurtech’s innovative ideas. There are already many different forms of insurtech in existence—new modes of telematics, car insurance marketplaces and startups with unique insurance models. This year, some insurers will develop strategic relationships with insurtech companies, partner with them or adopt similar technologies in their own companies. Providers are already advancing their own predictive analytics and insurtech may help them amplify their success.
After all, insurtech is taking off for a reason. Entrepreneurs who recognized generational differences within the industry are developing apps and new pricing models that challenge the status quo and gain the attention of millennials. For example, Root Insurance in the US has developed car insurance that appeals to consumers who are safe drivers. Root only insures good drivers because they believe such drivers deserve better rates than what is currently available to them on the market. The company measures drivers for a few weeks on their app before delivering them a quote, at which point a driver can decide whether they want to purchase coverage. The new model encourages consumers to share their driving data in exchange for fairly priced insurance, while rewarding those who are the safest on the road.
Other companies are developing telematics that work in conjunction with traditional insurance models. Insurers that use insurtech to their advantage this year will be able to better meet changing customer needs, enhance communications with tech and create new partnerships, all the while leveraging more data for insights.
We’ll bring you part two of five things to expect from the car insurance industry in 2017, tomorrow.
The preceding opinion article was written by Seth Birnbaum, CEO of EverQuote. The views expressed within the article are not necessarily those of Insurance Business.
