With the COVID-19 pandemic, UBI products’ main benefits have gained more recognition since PHYD and PAYD insurance models accommodate both frequent and infrequent drivers.
The Manage How You Drive (MHYD) and Try Before You Buy(TBYB) models bring UBI products to a new level for you as insurance carriers and your clients. They offer creating even more personalized client offers and high customer conversion.
The Manage How You Drive Model (MHYD)
Next-generation insurance telematics policies increasingly fall into the category of Manage How You Drive(MHYD) products. This model represents an evolution from the previous models, which mainly employ passive data collection systems.
Both PAYD and PHYD models enable little interaction with the driver beyond the web-based dashboards you can make available to your clients for follow-up of mileage consumption and effects on ratings stemming from unwanted behaviors.
MHYD generally includes all the essential characteristics of these previous models in terms of monitoring of driven distance (PAYD) and driving behavior (PHYD) while at the same time incorporating a considerably richer component of driver feedback.
Safer driving in real-time
The systems aims to influence your clients driving style more directly by leveraging additional technology such as in-vehicle interfaces to provide active feedback to drivers. This crucial difference enables MHYD solutions to significantly affect driving style by serving constant reminders of undesired behavior that cement a safe driving style.
Successful MHYD initiatives may even incorporate elements of gamification where drivers are rewarded fictitious points and awards when driving in a desirable way corresponding to low-risk behavior, thus improving the insurance risk rating while at the same time introducing some entertainment as drivers compete to stay ahead of their peers.
An important consideration for all types of MHYD solutions is to ensure that driver feedback is delivered in a non-distracting fashion, thus maintaining the driver’s primary focus on the road.
Try Before You Buy Model (TBYB)
Try Before You Buy product model is commonly used in a wide range of fields to denote the option for customers of trying out an offering before committing to the entire investment associated with acquiring the product or service in question.
It’s often the first serious step before a full insurance product to appeal to new drivers, collect data on them, and potentially convert them into customers with tailored offers based on measured risk and further monitoring. Smartphone apps have made TBYB possible and exciting, and today, they represent 20% of the active UBI program. Depending on the driver, the same app can morph into a different service.
TBYB is a more efficient acquisition tool than price comparison websites. The former allows the you to quote drivers on more predictive factors.
How it works
Scaled-back technology solutions commonly enable TBYB – most often leveraging
smartphone apps rather than dedicated onboard hardware – that log driving data to
rate driving style similarly to full-featured insurance telematics systems.
This model ensures manageable costs for you as insurance carriers and low barriers for your clients due to the relative ease of providing and downloading an app compared with arranging an onboard system.
The TBYB model can be used for PHYD and PAYD insurance products.
Valuable data for personalized offers
The app subsequently maps the drivers’ behavior during a short period – for example, defined by several kilometers to drive – whereby a preliminary scoring is determined. Data gathering offers both you and your client a preview of the expected outcome insurance telematics would generate in a particular case.
Depending on the result, this first driver behavior rating may qualify the driver for an initial discount. You can extend the deal if the client decides to sign up for a policy.
You can also launch TBYB-type apps as a first step in the insurance telematics space before (or even instead of) launching a full-blown program, thus enabling at least some degree of policy pricing differentiation. Some insurers have launched TBYB apps, which customers can use to qualify for discounts on non-UBI policies.
Due to the low cost of enrolling additional users on a smartphone app, TBYB offers are not necessarily time-restricted or even offered by an insurance company. You can market apps as driving behavior or driving improvement tools. The user can either sign up for discounted auto insurance or continue using the app without a connected policy.
The results are tangible. These apps have reached many potential customers and have a substantial conversion rate. Unsurprisingly, social integration has led to increased competition for many users as people are eager to get a better score than their friends.
About Amodo
Amodo is an award-winning insurtech company. Amodo Connected Insurance Platform enables insurance companies to create and brokers to place hyper-personalized usage-based insurance (UBI) products on the market. Amodo clients use its platform to gain strategic insights into customers' profiles, segment them into relevant groups and acquire profitable ones. Over the past nine years, this European insurtech launched close to 50 Connected Insurance projects worldwide with some of the leading companies such as AIG, Porsche Insurance, UNIQA, and many others. Amodo was named by Financial Times as one of the top 5 Insurtech companies globally, is a winner of a prestigious Digital Insurance Agenda Diamond Award in 2020, and has been named by Frost and Sullivan as the Best Practice Leader in the Usage-Based Insurance market in 2021.
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Sources
- https://www.investopedia.com/terms/f/four-ps.asp
- https://www.insurancethoughtleadership.com/how-insurers-are-applying-ai/
- https://www.ptolemus.com/research/mobile-insurance-global-study/
- http://www.berginsight.com/ReportPDF/ProductSheet/bi-insurancetelematics4-ps.pdf
- https://www.researchgate.net/publication/228432101_Pay-As-You-Drive_Pricing_and_Insurance_Regulatory_Objectives
