Why UBI will survive the pandemic

It’s been a hit and miss for Usage-Based Insurance (UBI) in Canada since it was first introduced about a decade ago, but brokers believe it will survive well past the pandemic-induced uptake of the past two years.

“It’s going to become a huge part of our business. To say UBI is the future of auto insurance is perhaps not too far from the truth,” predicts William Chan, president of BrokerTeam Insurance, a member of the Canadian Broker Network.

According to Chan, the industry has seen UBI uptake soar since more Canadian insurance carriers have been offering these telematics-based programs, and especially since the start of COVID-19, which has seen fewer drivers on the road and more drivers opting in to take advantage of the cost-saving, pay-as-you-drive benefits of UBI.

But what happens after the pandemic ends?

“Data, as we know, is driving everything we do,” Chan says. “Telematics will only become more essential in auto insurance from both a carrier and customer perspective – and in both personal and commercial lines.”

Globally, a recent study by Valuates Reports shows UBI’s growth has been driven by adoption of smartphones and connected devices. The study projected the global UBI market will reach US$77.25 billion by 2026, from US$25.46 billion in 2020.

 

More awareness, better education

At Chan’s brokerage, it has already become standard workflow to give customers the choice to participate in a UBI program, he adds. “We’ve learned that it helps our business in retaining existing clients and has a good impact on our results.”

The upwards trend seen during the pandemic has helped boost education and awareness around UBI, he says, in addition to insurers offering more education around their programs. Educating consumers has helped to convince some who may be skeptical about the collection of personal data. And regulatory changes have opened up the insurers’ ability to add a surcharge for drivers with less-than-ideal driving behaviours, says Chan.

Travelers Canada is the latest carrier to launch a UBI program. “More carriers are seriously giving thought to introducing UBI,” he says.

Consumers, especially millennial drivers, are becoming more educated about privacy matters, and that awareness may lead to a higher comfort level with all things data over time, Chan adds.

Telematics technology itself has become more sophisticated too, boosting uptake. “Whereas some UBI programs used to require a physical device to be installed in a driver’s car, which was just another reason for a consumer to say no, these days most programs are app-based. It’s quicker and more convenient than ever and drivers are seeing the benefits of the program, including that it can help improve their driving habits and road safety.”

A poll of Canadian drivers in October revealed that only 57% of Canadians had heard of UBI, and 81% had not tried it yet – presenting an opportunity for brokers to educate and sell, per Ratehub.ca. Of those polled, 67% expressed concerns about program accuracy, 56% said they worried about privacy, and 51% were concerned it would negatively affect their current rates.

While brokers have become more familiar with explaining the technology behind UBI and the benefits beyond cost-saving, Chan believes brokers can do a lot more to boost UBI uptake.

“It’s our responsibility as brokers to explain the benefits and potential pitfalls to our clients, to talk through the concerns around data collection and privacy,” Chan says. “At the same time, brokers need to be more engaged with carriers to ensure we understand how they are safeguarding our client data,” Chan says.

“While the biggest benefit for good drivers is a reduction in insurance premium, when you start explaining that ultimately, the goal is to make the roads safer for all of us, clients show a lot of interest.”

 

Feature photo courtesy of iStock.ca/Jag_cz