The Past (1998-2016)
During this time telematics in insurance was becoming known, as well as the benefits it could provide. Progressive’s Snapshot program has been the pioneer in programs supported by OBD/Dongle telematics.
These programs were careful not to scare off early adopters. They also offered discounts, monitored driver behavior on a temporary basis, and many did not even impose surcharges on bad drivers.
The value to insurers came largely from self-selection, i.e., only good drivers were interested in signing up. Despite this, insurance companies that were able to effectively manage the use of telematics data for rating not only performed better financially, but were also able to maintain an average retention rate of over 94%.
As a result, the number of policyholders sharing data with an insurer grew to 3 million in 2014, but then stabilized. However, then insurer engagement faded and market sentiment on UBI turned pessimistic.
After nearly 20 years and significant investment, only 1.5% of U.S. drivers were sharing telematics data with their insurers.
The Present (2017-2021)
While there came to be much speculation that perhaps UBI would die before we could see its potential, the truth is that around 2017, the insurer Allstate created Arity, a company dedicated to telematics, whose focus was on the use of the smartphone as a sensor.
Similarly, data collection that relies on mobile devices, managed to significantly increase the use of telematics by simplifying registration processes. Likewise, we can note that the market will grow 30% annually in 2019 and 2020.
The pandemic caused by COVID-19 made it possible to increase (even more) awareness of RBU among media, agents and customers, especially in pay-per-mile mechanisms, which means stronger growth in 2021, such as new mileage-based programs.
Initially, it was not clear whether mobile devices would be a suitable source of telematics data, but mobile-based solutions have been the growth driver of telematics in recent years.
The new approaches rely on sensors in the cell phone, sometimes paired with a tag attached to the vehicle, and monitor the policyholder throughout the duration of the coverage.
Continuous monitoring has allowed many major insurers to further expand the way they use telematics data, so we leave you an open invitation to join us in our next article with part two, where we will tell you about predictions for the future of telematics.
Wait for it soon! 🙂