Insurers adopting usage based insurance have now another dilemma to resolve – how to deal with the rising sophistication, popularity and reliability of smartphones.
According to new research from the US the use of mobile based telematics applications to capture driver behaviour will disrupt current UBI trends.
This view comes from the US consultancy Deloitte.
Deloitte argues that mobiles have ‘multiple structural advantages over other data collection platforms’.
It points out to insurers that no matter what type of commercial UBI strategy they adopt, the basic pattern of systems and processes – what is called the ecosystem – is basically the same.
Data needs collecting; that data needs managing; from those results the products designed and the consumers recruited.
But there are paradoxes. Market trends, says Deloitte, reveal that ‘more consumers have indicated interest than are active participants’.
And price, the cost of premiums, the attraction of lower premiums is the major incentive.
The second paradox is that original equipment manufacturer (OEM) technology – particularly that inserted in the vehicle is the way to provide ‘accurate and comprehensive data’.
However, as ‘designs and specifications vary’ so ‘fragmented, proprietary systems make wide-spread integration challenging for insurers’.
Step in the smartphone.
It is becoming more popular, more reliable, offers more features, and creates a language of its own which, worldwide, is being adopted at a remarkable pace.
Now, step up the smartphone with the driver-insurance app.
Delloite says the app eliminates the need for OBD dongles and the associated hardware costs.
Additionally it notes the data transmission is provided by, and paid for by, the consumer.
There is no need for device management (installation, maintenance, removal) and no need for processes or relationships to manage tens of thousands of devices.
The devices are (mostly) easy to use, says Deloitte. [Personal note here – this author is currently testing an app on a Samsung Galaxy phone – it’s a remarkable and clever device though not without its problems].
Notably, ‘installation, support and compatibility issues largely vanish as consumers know how to install and use smartphone apps’ and ‘updates and new features are easily, quickly and often automatically distributed to the existing customer base’.
It is for these reasons that Deloitte has good grounds to warn insurers that smartphones could fundamentally change the way UBI is developed.
The possibility is now open for the insurer to buy an app of the peg, and adapt it to trawl through its existing clients.
It could even bolt on an app which speaks to and listens to the owners vehicle offering maintenance and driving advice.
Among other things such sophistication could be an cost-effective way to ensure customer retention – thus avoiding customer poaching from rivals appearing to offer greater product excitement.