Consumers are beginning to see the safety benefits associated with telematics as a major proof point when deciding whether or not to adopt a usage-based insurance (UBI) program, while commercial fleet managers are interested primarily in insurance-cost savings achievable with telematics.
The 2014 LexisNexis Insurance Telematics Study also found that while only 25% of commercial fleet managers are aware of UBI, compared to 38% of consumers, the take rate for UBI among small fleet managers is higher – 27% for commercial fleet managers compared to 18% among consumers. That is, there is less awareness and greater demand for UBI among fleet managers, suggesting potential for significant growth.
Insurance telematics—otherwise known as usage-based insurance (UBI)—currently accounts for just 2% of U.S. personal lines auto insurance policies. However, within five years, UBI policies are projected to capture 20% to 30% of this market.
While insurance rate discounts continue to be the number one driver in usage-based insurance adoption, more consumers are now viewing telematics as a legitimate resource for ensuring car safety for themselves and their families.
Specific findings demonstrating increased importance of safety services among today’s consumers:
- Interest in teen tracking or knowing how your child drives has increased by 12% since 2013
- Forty-five percent of those surveyed are more likely to adopt UBI to get information on how others in their household are driving
- Interest in safety features, such as emergency roadside assistance, automatic emergency crash response and stolen vehicle tracking and recovery has increased by 6% since 2013
Another overall insight gleaned is that consumers' comfort levels with sharing personal UBI driving data are increasing. In fact, the consumer comfort levels with sharing individual UBI driving data (35%) are comparable to their level of comfort for sharing online banking data (36%), search data (29%) and social media personal information (27%).
“Smart devices, smartphones and smart cars are converging to create what should be a smart insurance choice for safe drivers and their insurers,” said Ellen Carney, Principal Analyst, Forrester. “The policy option is a win-win for the insured and the insurer: Customers pay lower premiums and improve their driving, while insurers attract safer and lower-risk drivers. What is surprising is how few U.S. consumers have actually bought it.”
Fleet Manager Findings
Price and savings are the No. 1 in fleet managers’ decision to incorporate UBI into their small commercial fleet. Despite significantly less insurer marketing for UBI in this space, small business awareness of UBI is relatively strong at 25%.
The study also explored the effect of value-added services, mainly fleet management capabilities, on a UBI program offering. Contrary to common beliefs, results show that small fleets want UBI, with or without fleet management services. They find the discount and simplicity of UBI appealing.
“Two-thirds of small fleet managers shop for insurance every two years or more,” said Ernie Feirer, Vice President and General Manager, Commercial Insurance, LexisNexis. “These fleet managers are looking for ways to save money and our study shows 27% of them would sign up for a UBI program. This leaves a lot of room for growth and a huge opportunity for carriers offering UBI.”
Specific findings showcasing how commercial fleet managers are adopting UBI to save money include:
- Saving money on commercial auto insurance is extremely important to three-fourths of fleet managers
- Seventy-two percent of fleet managers are more likely to enroll in usage-based insurance under a three-month trial
Small fleet managers also value services such as stolen vehicle tracking, fuel consumption/efficiency updates and automatic emergency crash response according to additional findings from the survey. Commercial fleet managers are also receptive to mobile UBI technology and 73% of small fleet drivers have smartphones.