Usage-Based Auto Insurance Outlook
Insurtechs have made progress in pushing usage-based auto insurance to the forefront, and the recent decline in consumer driving due to social distancing orders could make UBI even more attractive to consumers.
Numbers for miles driven have taken a nose dive in the wake of Covid-19. In response, auto insurers began to announce an estimated $10B in refunds and credits to policyholders in the first few weeks of April.
This windfall comes as a welcome development for consumers and gives auto insurers an opportunity to earn some goodwill. It may also prove to be a catalyst for usage-based insurance (UBI) — a concept that’s been around for over a decade but has struggled to gain traction.
Each of the top 10 US personal auto insurers have usage-based programs, and car manufacturers are beginning to work directly with carriers, transmitting data from embedded modems. Yet, enrollment levels are still low. In 2019, usage-based auto insurance premiums represented roughly 3% of the global auto insurance market.
However, that could change as auto insurers vie for market share and look to push products that could resonate with consumers, especially at a time when people are driving much less.