How carriers can solve the usage-based insurance adoption problem

Over the past couple of years, we’ve witnessed new consumer interest and willingness to participate in usage-based insurance programs. 

A 2020 survey by Bain found that 56% of consumers were likely to purchase UBI in the future, stating pandemic-era economic uncertainty and price sensitivity as key drivers for this shift. 

While the UBI opportunity is bigger than ever, there’s still exists an industry-wide struggle among auto insurers to get these programs off the ground, communicate their true value to policyholders, and scale them successfully. Insurance Business America recently noted that “UBI has only 5% market penetration but 85% of millennials say they’re open to these programs.”

Countless telematics programs have failed to break through the glass ceiling for a variety of reasons, from onboarding friction to expensive hardware, cookie-cutter strategies, evolving consumer preferences, and more. Today, the right formula exists for auto insurers to ensure highly scalable adoption (as achieved by our partners, Credit Karma and Progressive, after launching the Karma Drive program via Zendrive in 2020). 

Today’s successful, scalable UBI program consists of these crucial components:

• An ultra-preferred risk solution to build a better book of business while reducing CAC
• A UBI solution with a predictive scoring model that’s 10X more accurate than the industry average
• A UBI solution that also offers value-adding features like automatic collision notifications to make the processes like claims more seamless
  

These solutions work hand-in-hand to create a unique UBI engine primed to accelerate and strengthen the market, and further digitize an industry stuck in telematics of the past.

A smarter, more sustainable way to acquire ultra-preferred risk 

Today, traditional risk factors like credit scores aren’t powerful enough to ensure fair underwriting and segmentation. At the same time, customer acquisition costs demanded by traditional auto insurance marketing and advertising methods aren’t sustainable in the long term - given the steep costs incurred, these methods are seeing a limited payoff.

Enter: Zendrive’s ultra-preferred risk acquisition solution, powered by our Mobility Risk Intelligence platform. A must-have missing component to making UBI scalable, this solution allows insurers to offer personalized quotes to safe drivers based on their actual driving behavior. 

Through an extensive network of app publishers, insurers offer their prospects - millions of app users - an embedded digital test drive experience. Driving data is collected over a one-month test period, and based on their specified scoring criteria, insurers can acquire new preferred risk - and keep current customers happy and loyal - by offering fairer, be prices.

UBI that’s accurate, value-adding, and customer-centric

Succeeding with usage-based insurance in today’s market involves investing in the right program that’s not only accurate, based on massive amounts of driving data, but also tailored to current consumer preferences.

Zendrive’s UBI solution equips insurers with 5 key aspects of a winning UBI program:

• Memorable user experiences, including frictionless adoption and personalized feedback on driving behavior.
• Behavioral and contextual data that’s insightful and accurate, relying on AI and machine learning algorithms trained by over 200 billion miles of driving data.
• A customer-centric approach instead of a cookie-cutter, one-size-fits-all strategy, ensuring that all types of customers’ needs are met.
• A reliable, predictable score. Zendrive score is 10X more predictive of risk compared to industry-leading models.
• Additional value-adding features. These include safety features like collision detection and family safety, convenience-boosting features like claims automation, or fun loyalty features that involve gamification and rewards (i.e., a gift card to customers’ favorite stores) for driving safely.

Stronger together: The UBI program we’ve all been waiting for

When Zendrive’s ultra-preferred risk acquisition and UBI solutions work in tandem together, the opportunities are seemingly endless for both insurers and their customers. Let’s take a closer look at the benefits of this joint proposition.  

1. It’s both more affordable and sustainable. Assume that the cost of a standard program is $200K per year. If there are only 500 - 1000 users enrolled in the program, the unit cost of running the program goes up significantly. Moreover, you don't get sufficient mobility data and insights at scale. The program will eventually become unsustainable. Ultimately, there’s a lot of upfront investment involved in running a UBI program, and if insurers don’t know how to run their programs at scale, UBI becomes a natural barrier in their business.
   
   Zendrive’s solution allows for insurers, especially smaller to medium-sized companies with tighter marketing budgets, to acquire preferred risk at an extremely reasonable cost compared to other digital mediums. This makes testing out a UBI solution easier and more justifiable.
   
   
2. It creates a highly profitable engine that produces refined leads. Through Zendrive’s ultra-preferred risk acquisition solution, insurers can find the best leads, and through UBI, refine those leads even further - leading to a highly profitable engine of refined leads over time.
   
   
3. It immediately shows the value of driving behavior. One of the best parts of this joint proposition is the fact that insurers don’t have to wait a year or year-and-a-half to realize the value of understanding driving behavior. They start acquiring preferred risk from the very start.
   
   
4. It yields a handful of valuable, long-lasting benefits. With this ultra-preferred risk acquisition solution in the mix, insurers can ensure their UBI programs succeed, leading to improved expense and loss ratios, increased customer retention and satisfaction thanks to engaging experiences and personalization, and long-term profitability, among other benefits.
   

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Success story: Credit Karma’s unique market position

Don’t just take our word for it.

Our partner, Credit Karma, is riding today’s UBI wave the right way. According to Rory Joyce, General Manager of Credit Karma Auto, the company is “uniquely positioned to accelerate in [the UBI] market” and fill the large gap between those who are interested in UBI, and actual UBI market penetration. 

Credit Karma is primed for that success in part because it trusted Zendrive’s ultra-preferred risk  and UBI solutions. In late 2020, we partnered with Credit Karma and Progressive to launch the Karma Drive program, which rolled out in early 2021. The program allows Credit Karma members in 42 states to save more on auto insurance with data-driven digital test drive experiences. 

Based on their driving score, users can qualify for savings, as well as receive feedback on their driving behavior that leads to safer driving overall. Since its launch, hundreds of thousands of Credit Karma users have already opted into Karma Drive. 

“Karma Drive delivers on our vision to bring transparency, fairness, and accuracy to our members’ auto expenses with an easy opportunity to potentially save money on their auto insurance. Plus, it might even help them become more aware of ways to be a safer driver.”

- Rory Joyce, General Manager of Autos at Credit Karma

Unlocking future possibilities with the right UBI formula

The time is now for auto insurers to invest in the right UBI program. But to ensure these new programs don’t follow the footsteps of telematics’ past, it’s important to invest in preferred risk acquisition and UBI solutions that are altogether reliable, accurate, affordable, customer-centric, and, in turn, highly scalable. 

Ultimately, scaling and succeeding with UBI isn’t just about finding the best drivers - it’s also about continuing to refine these leads over time, and engaging with prospects and policyholders through embedded experiences across the entire customer journey. 

That may seem like a tall order, but it’s entirely doable following the Zendrive recipe.

Learn more via our complete guides to Zendrive’s ultra-preferred risk acquisition and usage-based insurance solutions, or contact us directly below. 

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