Retaining customers with UBI solutions explored by Morag Cuddeford. [Ins.Cuddeford.2016.07.28]

In a marketplace where insurers are increasingly fighting against commoditisation, being able to retain customers is a vital skill. Using usage-based insurance (UBI) to incentivise purchase is just the start. It’s how insurers leverage these technologies to retain customers that will help reduce churn and increase customer lifetime value (CLV).

According to a 2015 J.D. Power report, customer satisfaction with their insurance company indexes at an average of 750. With UBI offered, this rises to 767 and without it, it drops to 744. According to IHS Automotive, UBI subscriptions are expected to rise to 142M globally by 2023.

Research from Towers Watson from May 2016 showed that Millennials yet again prove the most fertile ground for UBI schemes, with 72% of US Millennials stating it is a better way to determine their premium and 84% would be willing to alter their driving style as monitored by UBI if it meant lower premiums.

Robin Harbage, a director at Towers Watson, adds: “This is a mass market product but we’re focusing on the Millennials. It’s going to expand out but the Millennials are the growing audience.”

Where UBI drives retention

Critically, while lower premiums were what attracted a sale, the services offered by UBI proved to be more valuable when the policy was ‘in use’: 87% of US drivers surveyed stated that they wanted UBI to provide theft tracking while 86% wanted automated emergency callouts in the event of an accident. A further 83% wanted their policy to include breakdown notification.

It is clear that while premium incentives are increasingly essential to getting customers on board, the value of UBI when it comes to servicing customers and retaining them is in the value the policy adds while it is in train. Indeed, 80% of the respondents in the Towers Watson survey stated they would be willing to pay up to $45 (£34.40) more if their policy came with value-added services.

Harbage explains: “At the top of the list is savings but next to that is the ability to get assistance. When something happens to me I want people to fix my problems and make me feel safer. If I have an app that pinpoints where I am, sends out an alert immediately and within minutes I get a text to say they’re on my way and have all the details, the difference in experience is phenomenal compared to someone who has to call up and explain the whole situation.”

The seamlessness of customer experience is extended particularly in the claims scenario. Blair Currie, vice-president of business development at IMS elaborates: “This is the moment of truth. Loyalty can be mundane but the thing that cements it is service. How well that accident is managed is important and if you give them something valuable then they’ll stick with it.”

In terms of what that service entails, Currie suggests that it all revolves around using information to remove as many pain points as possible: “Navigation, a concierge-type service or just making sure that when you call up a customer still on the site of the accident, you don’t say ‘do you want to make a claim?’ – you ask if they’re OK. In some cases, a rental car is dispatched right away.” This ‘No Questions Asked’ approach is not just paying lip service to customer relations. As Currie points out, the longer a claim takes to manage, the higher the costs to the insurer in both financial and reputational terms.

Getting the message across

Currie adds that, in the US, reaching your market is still very much a job for broadcast advertising. “It’s how insurers are still developing their brand. Geiko and Progressive are direct so they don’t use brokers but for the most part in the US market, the broker channel is still a vital link in the chain.” He adds that technology today does have the potential to disintermediate but that it is up to those brokers to demystify UBI for the audience and guide them to purchase.

Harbage notes the need for the intermediary segment to get on board with UBI, particularly in the US. “A lot of our work is training our broker network and emphasising how important this is and empowering them to sell it.” As far as the Millennial segment is concerned, the ubiquitous Facebook and other social media does have a role to play but insurers have to understand the rules of engagement. As Currie points out “They don’t want to talk to you, they want to talk to each other.”

UBI technology has the ability to introduce some interesting features to customers from gamifying good driving by creating driving score leagues to gathering accident data and automating emergency and breakdown service dispatch. It has the ability to remove or at least minimise some of the barriers to that approach to date, such as fraud prevention and allows insurers to meet customers’ needs.

But this is just the tip of the iceberg. “The insurance industry is still very conventional,” Currie concludes, “but the company that breaks free and says we are not an insurance company, we are a customer service business? That’s the company that is in the customer’s corner. It’ll take a few very brave companies, Google already took a look, but soon we’ll have someone who isn’t from the insurance industry playing in this space. UBI is pushing the industry towards a new customer focus.”

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