The advent of usage-based insurance (UBI) has been welcomed by many consumers as a policy that allows them to save money, and property and casualty insurers say this product will significantly change the industry.
UBI utilizes telematics, or data recorders, to monitor and assess driving behavior, the results of which are used to determine insurance rates, according to Insurance and Financial Advisor News. As good drivers see these programs as a way to curb costs, many companies that adopt UBI may see a boost in insurance sales.
Research from advisory firm Strategy Meets Action shows that 75 percent of casualty and property insurers believe UBI will fundamentally change the auto insurance industry between now and 2020, IFA News reports. The report shows that roughly 70 percent of companies are developing some stage of UBI, and eight out of 10 top companies have already piloted or fully implemented this program.
"Insurers have been experimenting with telematics for 15 years," said study co-author Mark Breading, according to IFA News. "Now, telematics is rapidly gaining momentum, and every auto insurer should be thinking about their plans for telematics and usage-based insurance."
In addition to lower costs for insurance, many consumers view telematics as a way to ensure more safety on the road. As a result, this type of insurance may gain momentum with parents who want to ensure their young drivers are exhibiting safe behavior on the road.