Connected Cars Will Make Data-Based Insurance The Default Setting

Steve from LexisNexis looks at how connected cars, plus the rise of personalised quotes based on driver data.

Get Set For Connected Car Data

by Steve Kerrigan, Senior Vertical Market Manager, Insurance & Connected Car, LexisNexis Risk Solutions, UK and Ireland

If there can be an insurance related silver lining to 2020 it might be the interest it has created in usage-based insurance (UBI). The motor insurance market has a big opportunity right now to use driving data to deliver more personalised insurance to a broader audience of drivers. In addition, any work done today with driving data will pay dividends in terms of preparedness for the data coming downstream direct from the connected car.

The power of driving data is undeniable. In a nutshell, it is a more accurate way to better predict collision and loss frequency, support greater consumer segmentation and precision pricing. Insurance providers can also benefit from self-selection.

From a brand enhancing perspective, driving applications can offer strong engagement opportunities while the act of providing UBI demonstrates a brand’s commitment to driver safety.

For the consumer, UBI can deliver fairer pricing that gives them more control over their motoring costs and supports safer driving – our analysis of the UK Government’s road casualty data identified a 43% fall in young-driver casualties over the past eight yearsi as telematics adoption increased.

Perhaps the most important factor is that consumers want insurance products based on their personal driving data. Prior to the pandemic, LexisNexis Risk Solutions conducted driver research in the UK, which found that millions of motorists have positive views towards usage based insurance products. They’re simply at the point where the right product benefits need to be sold, explained and offered to them.

As consumer behaviour and attitudes alter, the demand for pay-as- you-drive models and mileage-based products is highly likely to increase.

While many consumers shift to home working on a permanent basis, in contrast, longer term, we could see more car use as an alternative to shared public transport. Cap Gemini research suggests a rekindling of interest in vehicle ownership among younger consumers who want digital engagement and a recent Forbes articleiv claimed the pandemic has restored our relationship with cars. The article went as far as to describe the car as a form of refuge.

Access to driving data is already enabling the market to respond to the changes in vehicle use and risk to deliver more personalised insurance. That capability can only grow.

Keenly aware of the connected car trajectory, the insurance market is now focused on preparing for a near-term future where driving data will be sourced directly from the vehicle’s imbedded connectivity.

This will provide the force behind new insurance products such as pay-how-you-drive (PHYD), pay-as-you-drive (PAYD) and manage-how-you-drive (MHYD) – offering consumers greater choice, flexibility and control.

Driving data from connected cars will create new opportunities for insurance providers and benefits for consumers. As a consequence, we should expect to see UBI becoming a bigger part of the book of business within insurance providers. Certainly, those who know how to offer UBI could lead the market as connected car data comes into the insurance eco-system, grabbing the opportunity to take more personalised motor insurance cover to the mainstream.