Setting a New Normal for Auto Insurance? The Use of Telematics and UBI Programs

by Juan Mazzini, November 1, 2016
Industry Trends


Celent has released a new report titled Setting a New Normal for Auto Insurance? The Use of Telematics and UBI Programs. The report was written by Juan Mazzini, a senior analyst with Celent's Insurance practice.

There seems to be a case for telematics-based usage-based auto insurance, though advances in several technologies could take insurers to a crossroad where they need to decide whether to investing in UBI it or leapfrog to the next stage. 

Motor insurance is an attractive global market of US$670 billion, with the top 10 markets having a share of 76%. UBI programs are in place in all of these markets and affect the position of leading incumbents by changing how risk is priced and managed in auto insurance. Insurers have mixed feelings regarding UBI programs for auto, though pioneers have paved the way to justify a higher level of optimism regarding a wider adoption in the short and middle term.

UBI as we know it today is at a transition stage while smarter vehicles become the norm and as we move into the direction of autonomous driving.
“As technologies around collision avoidance and autonomous driving mature, they have the potential of fundamentally changing the nature of risk and how it is assessed. Widespread digital adoption, analytics, AI and machine learning, and the IoT are enablers of a totally different approach to insurance in all of its lines of business. A product like this would be more about accompanying your lifestyle and adjusting the risk assessment to your particular situation, while pricing it as you go,” commented Mazzini.

“The implications and requirements to support this approach would touch virtually every core function in the company, and encompass decisions around core systems functionality, digital solutions, data integration, analytics, machine intelligence, third party partnerships, and deciding on infrastructure and data ownership,” Mazzini added.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary



Key Research Questions




Auto Insurance and UBI Programs



Favoring Telematics-Based Auto UBI


Introducing Telematics-Based UBI Programs in a New Market



Originating Motivation



Making the Case for Innovation



Early Movers



The Tipping Point


Final Thoughts



Considerations for Insurers


Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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