The Usage-based Insurance (UBI) model holds fundamental differences from the auto insurance as we know, in that it aims at providing protection coverage to policyholders using personalized plans. UBI adds great value to both the insurers as well as the customers with lower premiums, increased road safety and higher customer retention rate.
How it works?
A UBI program typically tracks vehicle mileage and driving habits, monitors risky practices on the road as well as get access to location data in case of collisions or accidents. This includes monitoring aspects such as speed, acceleration, hard braking, hard cornering, miles driven, time of day, phone use while driving and more, to offer policyholders with customized plans as per their exact need, use and risk profile.
While many insurers make use of third-party devices to access this information, it is the vehicle-sourced connected vehicle data that really fuels accurate UBI predictions, and lead to deductions in policy costs. Once the relevant data is collected, auto insurers can easily analyse it as per the mobility trends and standards to offer tailor-made plans to their customers.
How is UBI Disrupting the Auto Insurance Landscape?
The usage-based insurance model differs from traditional auto insurance by means of data which it consumes to decide premium costs for policyholders. Unlike conventional auto insurance plans that take into account passive information such as driver’s credit score, location and number of claims submitted to reach price conclusion, UBI factors in how much the vehicle is driven in a particular time frame and how well did the driver perform.
By actively analyzing both historical driver behavior data, to evaluate risk profiles and driving skills, and real-time telematics data, to accurately assess location, vehicle breakdown and collision events, UBI expands the insurer’s scope beyond just offering an insurance product. Insurance providers get widened abilities to enhance driver safety on the roads, offer customized premiums and explore new product innovations.
Types of Usage Based Insurance (UBI)
The PAYG option is beneficial for drivers who don’t get on the road much, or do so occasionally, and hence aren’t required to pay the same flat policy rate as someone who drives most days of the year. As a result, drivers get rewarded with discounted premiums corresponding to their vehicle usage, and since they don’t pose as big of a risk on the roads, the insurance providers stay viable as well.
The PHYG model simplifies policy pricing based on how well the driver drives, their skills, safe practices being inculcated by them as well as harmful and dangerous activities being avoided on the road. In a nutshell, a driver who’s comparatively a safer driver would have to pay less premium as they’ll be less likely to be involved in an accident, and vice-versa.
Advantages of UBI
Beyond reducing insurance expenditure for thousands of drivers around the world, the UBI model also offers some key benefits to the entire automotive industry based on its working procedure.
- Heightened road safety as a result of driver behavior monitoring and incentive-based techniques to improve driving skills.
- Identification of coaching opportunities for risky drivers, tailor-fit to their actions.
- Availability of personalized insurance plans, based on quality and quantity of usage.
- Expedited claims processing with transparent collision data and information.
- Detection of frauds and false claims, as well as the actual cause behind the accident.
- Offering emergency services and road-side assistance with higher efficiency.
- Opportunities to send relevant new policy, policy renewal and maintenance alerts.
Kick Start Your UBI Journey With CerebrumX
Powered by CerebrumX’s range of advanced solutions, offering UBI model to your insurance customers is as easy as thinking about it. Take advantage of our AI-powered Augmented Deep Learning Platform (ADLP) to unlock the true value of connected vehicle data and gain predictive insights that’ll enable you to expand your product portfolio. The best part, there’s no need for any infrastructure development and you can leverage your existing networks to offer customers with the new and improved usage-based auto insurance.
Further to ensure complete trust and uninterrupted business operations, we enable you to give the power back to the customers, by letting them grant, revoke or edit consents easily, with our white label platform, CerebrumX Secure Consent.