Introduction

The premise of UBI is that it identifies good drivers and influences behavior resulting in fewer or less severe accidents. Insurers charge these drivers lower premiums for improved claims experience. Insurers verify the driver’s behavior wirelessly from a telematics device in the vehicle supported by a robust set of IT solutions.

Features and benefits

• Assessment of the UBI marketplace.
• Identification of key UBI ecosystem participants.
• Discussion of the major business models being used by insurers offering UBI.
• Discussion of the drivers and inhibitors shaping the UBI marketplace.
• Discussion of the technology and telecommunications requirements needed to implement and support UBI.

Highlights

UBI premium-setting is based on an individual driver’s behavior and represents a dramatic shift from insurers’ use of the law of large numbers. This fragmentation of the risk pool puts insurers on a path towards one-to-one customer interactions and provision of best-of-class customer service.

Your key questions answered

• What is usage-based insurance?
• Which insurance companies are offering UBI?
• What are the opportunities for mobile operators in the UBI marketplace?
• What are the opportunities for IT firms supporting insurers offering UBI?
• What are the value propositions and major objectives of key UBI ecosystem players?

Table Of Contents

SUMMARY

In a nutshell
Ovum view
Key messages
UBI repeals the law of large numbers
UBI programs need robust mobile telecommunications
UBI is all potential
No optimal rating model apparent
Insurers will be getting deeper into the information business

THE UBI LANDSCAPE IS AN ECOSYSTEM OF MANY INDUSTRIES

UBI is a dramatic shift from traditional automobile insurance
The UBI marketplace encompasses a diverse ecosystem of industries
Embedded chips and robust wireless telecommunications make UBI possible
The essence of success in the UBI ecosystem is coopetition among industries
A growing number of insurers worldwide participate in the UBI space

FINDING THE RIGHT GO-TO-MARKET STRATEGY IS CRUCIAL

A variety of insurer business models exist, each with its own implications for UBI providers
Prepaid UBI models let customers buy blocks of miles
Mileage/odometer-based UBI models are relatively inexpensive
Behavior-based UBI models provide insurers with the most desirable information
Location-based UBI models are desirable, but also controversial
Device-based plus VAS models create revenue opportunities
Insurers must balance the benefits of key rating factors with the cost of collecting them
The UBI space is characterized almost entirely by market potential
There are three major operational platforms in the UBI ecosystem
Customer trust platforms can help insurers save on UBI operational costs
Partner platforms support a variety of UBI business models
Ownership platforms give insurers VAS positioning strength
There are several market positioning paths available to insurers
DRIVERS AND INHIBITORS SHAPE THE UBI SPACE
A host of market drivers could make UBI a reality
Inhibitors slowing UBI adoption are centered around cultural inertia and insurer uncertainty
UBI participants must manage a wide range of regulations
TECHNOLOGY PLAYS A KEY ROLE IN THE UBI SPACE
Technology underpins entire process
Wireless communications is critical to UBI
UBI platforms require equipment, connectivity, and applications
Mobile operators need device platform partners for UBI
Wireless access and device costs must come down
RECOMMENDATIONS
Recommendations for insurance companies
Recommendations for mobile operators
Recommendations for information technology vendors
Alternative views
APPENDIX
Further reading
Methodology
Definitions
Authors
Ovum Consulting
Disclaimer
Usage-Based Insurance