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Usage-Based Insurance is Running Out of Gas

By 7th July 2016No Comments
A lack of newly introduced telematics programs for usage-based insurance has caused a major slowdown in the market’s progression in North America, according to a new report from industry-research firm Strategy Meets Action.
In its study, “Telematics in P&C Insurance; The Need to Move Beyond Pricing”, SMA cited regulatory uncertainty and slowed adoption of programs by customers as key reasons for the fall off. Most notably, however, mid-sized carriers are showing little interest in entering the market, says SMA Partner Mark Breading. Tier one insurers are carrying the water for the entire industry.
“Smaller carriers are so consumed with trying to modernize core systems and figuring out mobile and portals that they find implementing a UBI program to be fairly complicated,” he said.
According to SMA’s study, telematics in the U.S. and Canada is now advancing at a measured pace compared to a few years ago when insurance experts predicted it would sweep the industry. Using a sample size of 45 P&C professionals, SMA determined North American insurers are not just behind other nations in utilizing collected data, but also in services and perks offered to policyholders.
“They know they are collecting a lot of data, but also know that it is also very narrowly focused [in terms of usage],” breading said. “Some of that has to do with a need  for insurers to build a historical base of data.”
A majority of carriers currently only offer premium discounts to customers, which poses a challenge to carriers as they gain customers through lower monthly rates, but simultaneously limit growth. The potential is there for insurers to offer customers other benefits such as, road side service, maintenance and safety tips, Breading says.
Going forward, the telematics market should pick up again with previous patent and legal barriers resolved and regulations now in place. Mid-sized carriers will also continue to upgrade core systems and enter the market.
Ultimately, Breading predicts telematics will merge with the semi and autonomous vehicle industry.
“Telematics as a separate solution or entity has about a decade left,” he said.
Tim Kelly

Tim is a highly qualified Independent Engineer with over 20 years experience as an Engineering Assessor of damaged vehicles.

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