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Usage-based insurance (UBI). Main trends and prospects for the car market till 2022

February 2020

Analytical Report (full version)

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Analytical Report (full version)

Usage-based insurance (UBI). Main trends and prospects for the car market till 2022
Usage-based insurance (UBI). Main trends and prospects for the car market till 2022
February 2020

Usage-based insurance (UBI). Main trends and prospects for the car market till 2022

February 2020

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J'son & Partners Consulting presents results of an updated study dedicated to the current status and prospects of the Usage-based insurance (UBI) or Telematics Insurance market in Russia and the world. The global insurance market is undergoing significant changes, replacing traditional models, products and services with new ones based on the use of digital technologies.

 

Insurance companies are increasingly turning to the implementation of innovative business models. The priority areas of the insurance segment development are forecasting losses and reducing insurance risks using Big Data analytics systems, Artificial Intelligence, Blockchain technologies, and the Internet of things.

 

The Internet of Things and telematics technologies provide access to real-time data, create an opportunity to implement effective insurance underwriting and pricing processes, and minimize risks. Insurers, in partnership with technology companies and telematics service providers, create new value-based product offers that are tailored to individual customer needs, providing new possibilities to choose, simplicity, and flexibility of the offered solutions.

 

Innovative insurance telematics products, including Smart auto insurance, are widely represented in the global insurance market. Insurance using telematics equipment based on actual driving data (Usage-based insurance, UBI or telematics insurance) is a type of auto insurance that allows insurers to collect driving data at an individual level, provide feedback, and offer insurers personalized price offers based on driving performance analysis.

 

Advantages of insurance telematics in car market

 

The main advantage of UBI is the use of additional data on individual actual driving models — not only aggregated statistics and driving history based on past trends and events, which is typical for traditional car insurance models; UBI allows you to create personalized accurate insurance solutions.

 

UBI programs create benefits for insurers, policyholders, and society as a whole. These benefits include:

 

- linking insurance premiums to actual vehicle performance indicators allows insurers to determine optimal insurance conditions, reducing their risks;

 

- such programs increase the availability of insurance services for low-risk policyholders, many of whom may be low-income drivers;

 

- policyholders can control insurance costs by reducing mileage or changing their driving style to a safer one;

 

- reducing the total mileage and safer driving leads to a reduction in road accidents, traffic congestion, and vehicle emissions, which helps society as a whole.

 

Development prospects of UBI

 

Insurance telematics products implemented in various market segments create large amounts of data that can be used in insurance processes, providing additional technological opportunities for creating effective innovative products and services. In the insurance industry, big data analytics (BDA) solutions based on detailed data sets and forecast models are becoming increasingly important as they cover the entire value chain.

 

More and more often we can see that traditional data sources are combined (rather than replaced) with new sources, such as telematics data, online media data, and data from additional external sources, providing greater detail and volumes of diverse data about consumer characteristics, behavior, and lifestyles. This allows you to develop personalized products and services and assess your risks more accurately. Data and algorithms (used to calculate driving points and claims points) obtained from third-party suppliers can be used in technical models.

 

BDA tools such as Artificial Intelligence (AI) or Machine Learning (ML), for example, are already used by insurance companies and models based on these tools are mainly used in pricing, underwriting, and claims management.

 

In the coming years, the market for insurance telematics and UBI products is expected to develop under the influence of such factors as the growth of the connected car client base, IoT devices, and the introduction of 5G technologies.

 

The global market of UBI

 

The global market of smart car insurance is in the stage of active growth, supported by the development of Connected Car systems, expansion of the product line from insurers, and development of various models of insurance telematics solutions and devices.

 

According to a study by PTOLEMUS Consulting Group (2019), the global UBI insurance market reached almost 25 million active UBI policies in 2018. Mobile UBI has become the main driver of this growth.

 

Berg Insight estimates that by 2023, the number of UBI insurance policies in Europe will reach 47.9 million, and 49.8 million in North America.  

 

 

Key players in UBI market

 

The smart car insurance policy value chain covers several industries: insurance companies, telematics providers, telematics equipment suppliers, telecommunications companies, car manufacturers, and others. Insurance companies interact with all parts of the value chain, they are closest to the final consumer and enter into partnerships with major market participants:

 

- Insurance companies[1]

 

In the world: Progressive, Allstate Corporation, Liberty Mutual, UnipolSai, Generali, etc.

 

In Russia: AlfaStrakhovanie, Ingosstrakh, ASKO-INSURANCE, Renaissance Insurance, RESO-Guarantee, etc.

 

- Telematics service providers, technology providers

 

In the world: Octo Telematics, Vodafone Automotive, LexisNexis Risk Solutions, Meta System, Xirgo, Danlaw, etc.

 

In Russia: Meta System, P-Telematics, Smart driving laboratory, Raxel Telematics, etc.

 

- Telecommunications companies

 

In the world: AT&T Inc., Telefónica, Verizon, Vodafone.

 

In Russia: MTS, VimpelCom.

 

[1]The companies considered in the study are listed.

 

The Russian UBI market

 

UBI or telematics insurance is one of the blocks of the largest segment of IoT systems and IoT systems in transport, which includes fleet management, ERA-GLONASS systems, control systems for heavy vehicles, connected car infrastructure, remote diagnostics and other systems.

 

According to J'son & Partners Consulting, in 2018, the volume of the smart car insurance market in the Russian Federation amounted to about 20,000 policies, i.e. less than 1% of the total number of CASCO (Comprehensive Cover) insurance contracts. The low level of penetration of insurance telematics services can be explained by a number of factors that have had a negative impact on the trends of the Russian market, including:

 

- refusal of insurance products in conditions of decreasing real disposable income of the population, low level of confidence in innovative insurance products, non-obvious advantages of insurance telematics products for policyholders;

 

- insurers' concerns about the possible deterioration of operating performance indicators due to lower insurance premiums, additional costs for purchasing equipment and services, and cannibalization of sales of traditional CASCO (Comprehensive Cover);

 

- the unwillingness of insurers to implement innovative insurance telematics products based on models for calculating and predicting individual risks;

 

- unavailability of the regulatory framework to ensure the effective functioning of insurance telematics systems and services, including in terms of data privacy guarantees.

 

By 2022, J'son & Partners Consulting predicts that the UBI market will grow to 170,000 connections by 2022.

 

Development prospects of the Russian smart car insurance market are related to a number of drivers, including:

 

- introduction and development of insurance telematics products, increasing the activity of insurance companies to stimulate the stagnant auto insurance market. A significant boost to the market can be given by the introduction of insurance products based on the use of mobile devices, Mobile UBI;

 

- insurers strive to reduce risks, optimize costs associated with accidents and vehicle theft, minimize insurance fraud, and improve efficiency by optimizing customer interaction processes;

 

- implementation of comprehensive insurance products based on the use of digital technologies, including additional services with added value;

 

- increased activity of automakers, growth of the total base of new cars equipped with OEM devices;

 

- possibility for policyholders to optimize insurance costs by receiving individual offers, as well as to adjust the driving style and behavior;

 

- the ERA-GLONASS system development, its functionality and services is becoming a driver for the introduction of insurance telematics products. The device is a technical means of control and can potentially be used for smart insurance and additional services, including remote diagnostics of the vehicle condition;

 

- one of the most promising areas is the commercialization of big data in the transport sector, including its use in insurance telematics processes and products. The resource of the national telematics service platforms Avtodata being created can be used in smart car insurance solutions;

 

- development of the legal framework regulating insurance processes and insurance telematics, including the OSAGO (compulsory insurance of motor third-party liability) liberalization project;

 

- general global trends in the development of the insurance telematics market in auto insurance.

 

____________________________

 

This newsletter was prepared by J'son & Partners Consulting. We make every effort to provide factual and forecast data that fully reflect the situation and are available at the time of the release of the material. J'son & Partners Consulting reserves the right to revise the data after the publication of new official information by individual players.

 

 

Detailed results of the study presented in the full version of the Report:

 

«Usage-based insurance (UBI). Main trends and prospects for the car market»

 

TERMS AND DEFINITIONS

SUMMARY

INTRODUCTION

  1. TELEMATICS SOLUTIONS IN AUTO INSURANCE

1.1.TECHNOLOGICAL SOLUTIONS USED IN INSURANCE PRODUCTS

1.1.1.  Telematics devices in insurance solutions

1.2.ADVANTAGES OF INSURANCE TELEMATICS IN CAR INSURANCE

1.3.DEVELOPMENT PROSPECTS OF INSURANCE TELEMATICS

  1. OVERVIEW OF THE GLOBAL SMART CAR INSURANCE MARKET

2.1.MARKET VOLUME, TRENDS AND FORECASTS

2.2.MOBILE USAGE-BASED-INSURANCE MODEL, MOBILE UBI

  1. KEY PARTICIPANTS OF THE GLOBAL SMART INSURANCE MARKET

3.1.INSURANCE COMPANIES

3.1.1.   Progressive

3.1.2.   The Allstate Corporation

3.1.3.   Liberty Mutual

3.1.4.   UnipolSai

3.1.5.   Generali

3.1.6.   Company 6

3.1.7.   Company 7

3.1.8.   Company 8

3.1.9.   Company 9

3.1.10.  Company 10

3.1.11.  Company 11

3.1.12.  Company 12

3.1.13.  Company 13

3.2.TSP (TELEMATICS SERVICE PROVIDER)

3.2.1.   Octo Telematics

3.2.2.   Vodafone Automotive

3.2.3.   LexisNexis Risk Solutions

3.2.4.   Company 4

3.2.5.   Company 5

3.2.6.   Company 6

3.2.7.   Company 7

3.3.TTP (TELEMATICS TECHNOLOGY PROVIDER)

3.3.1.   Meta System

3.3.2.   Xirgo Technologies  

3.3.3.   Danlaw

3.4.TELECOMMUNICATIONS COMPANIES

3.4.1.   AT&T Inc.

3.4.2.   Vodafone

3.4.3.   Verizon

3.4.4.   Telefonica

  1. ASSESSMENT OF THE RUSSIAN SMART CAR INSURANCE MARKET

4.1.THE RUSSIAN MARKET OF CASCO AUTO INSURANCE

4.2.THE RUSSIAN MARKET OF SMART CAR INSURANCE

4.3.PROFILES OF MAJOR PLAYERS

4.3.1.   Insurance companies

4.3.1.1.AlfaStrakhovanie (Alfa insurance)

4.3.1.2.Ingosstrakh

4.3.1.3.ASCO-INSURANCE

4.3.1.4.Renaissance Insurance

4.3.1.5.RESO-guarantee

4.3.1.6.Company 6

4.3.1.7.Company 7

4.3.1.8.Company 8

4.3.1.9.Company 9

4.3.1.10. Company 10

4.3.1.11. Company 11

4.3.1.12. Company 12

4.3.1.13. Company 13

4.3.1.14. Company 14

4.3.1.15. Company 15

4.3.2.   Telematics service providers, technology providers

4.3.2.1.Meta System

4.3.2.2.P-Telematics

4.3.2.3.Smart driving laboratory

4.3.2.4.Raxel Telematics

4.3.2.5.SpaceTeam

4.3.2.6.Company 6

4.3.2.7.Company 7

4.3.2.8.Company 8

4.3.2.9.Company 9

4.3.3.  Telecommunications companies

4.3.3.1.VimpelCom

4.3.3.2.MTS

  1. DRIVERS AND BARRIERS OF THE SMART INSURANCE MARKET DEVELOPMENT IN RUSSIA

APPLICATION. LIST OF COMPANIES MENTIONED IN THE REPORT

List of pics

Rice. 1.  The number of UBI policies in Europe and the United States, mln. policies

Rice. 2.  Implementation schemes for the Mobile UBI Model

Rice. 3.  Snapshot insurance product, an OBD telematics device

Rice. 4.  Drive Safe & Save insurance product

Rice. 5.  Selective® Drive insurance product

Rice. 6.  Blocks of the Octo Telematics insurance IoT platform

Rice. 7.  DriveWell telematics product

Rice. 8.  DataLogger telematics product

Rice. 9.  Contribution of the main segments to the insurance market dynamics

Rice. 10. CASCO (Comprehensive Cover) insurance market, 2015-2018

Rice. 11. Dynamics of issued car loans, thousand loans

Rice. 12. Sales of new passenger and light commercial vehicles in Russia, mln. deals

Rice. 13. Insurance telematics market in car insurance in Russia, 2015-2022

Rice. 14. Avtodata platform, a tool for collecting big data