UBI ( Usage Based Insurance ) an Opportunity For Insurers To Rapidly Expand Like TELECOs did with Prepaid PlansBy: Sai Pattabiram - Jul 02, 2020
Industry 4.0 technologies are about to disrupt the insurance sector is more ways than we can Imagine .
The first of these and the lowest hanging fruit is already seeing disruption by way of UBI products being offered by a range of company’s like Tata AIG , Bharati Axa , ICICI and most recently Edelweiss Switch .
The UBI policies being offered by various insurance company’s is the similar in ways to the Pre Paid Mobile Plans that we are all familiar with.
Prepaid Mobile“ Pay as You Go “ plans revolutionized the industry by raising volume growth by Geometric proportions especially in price sensitive markets like India while lowering operational and collection costs for mobile companies . With the easing up of the regulations by the Regulatory Authority TRAI the subscriber base in India grew for around a 100 Million subscribers to over a Billion subscribers in around seven years .
UBI Insurance is now poised for such growth over the next 6 to 8 years .
UBI set to Revolutionize the sector like Prepaid Plans did for Mobiles :
With the general slump in the Automobile Industry Insurance Service providers require to innovate and offer cost effective products to Tap into the 60 % vehicle owners in India who still continue to use uninsured vehicles . With Motor Insurance amounting to 40 % of the General Insurance market the competition in this segment is severe with very low margins on the premiums .
This is where Insurance companies can take a leaf out of the Mobile Service providers growth story by creating pocket size products while automating the plan renewal process across variants .
The customer experience of insurance products requires to be in line with the level of customization that a prepaid mobile user experiences when topping up their plans .
Vehicle Telematics Enabling Customization in UBI Insurance
Vehicle Telematics offers insurance companies an opportunity to innovate and offer a range of customer centric insurance plans much like those offered by the Mobile service providers in the form of prepaid SIMS.
It is the reliability and the expansion of Mobile Connectivity via the SIM CARD that enabled TELECOS to offer highly flexible customer centric products directly to the phone in near real time .
This is exactly where Vehicle telematics products will play a huge role in the growth of the UBI products offered by Insurance companies .
The telematics solution for UBI products would require to be a completely automated close loop solution much like that used for prepaid mobiles starting from ease of installation like a SIM to reliability of its communication to its ability to update low cost plans automatically almost instantaneously .
In addition to the role performed by the SIM in the case of the phone the telematics hardware would have to have the reliability of pushing locational data of the vehicle to cloud servers for logging data and usage parameters of the vehicle while being easy to install like the Mobile SIM .
Vehicle Data received on the servers would require to be used to create a range of customized products structured along the lines of a variety Base Plans along with online updatable instantly delivered Top Up variants along the lines given below as an example .
E Commerce & Hyperlocal UBI :
1. Base Plan : Geo fenced locational operation with distance coverage limitation . eg within 10 kms radius of home location coupled with total distance travelled limitation would be a highly attractive proposition for hyper local logistics and local small businesses like grocery , milk vegetable shops .
Top Up Plans : variants from Home Location
i) Additional distance top up plans
ii) Additional time validity plans
iii) Out station travel plans
Two variants within this example could be for Variants for commercial and personal use ( for vehicles owned by retired persons ) .
Creative UBI products can surely expand the ability of Insurance service providers to expand their customer base and reach by innovative use of the Data generated by on board telematics devices.
Insurance companies on their part need to evaluate and choose their Telematics partners carefully though as a key requirement for an effective solution is a Total End to End control of the entire solution from Hardware Design to Dashboard configuration including Automated Alert Generation will be key to them in offering the best customer experience while reducing their operational costs through deployment of Artificial Intelligence , Machine Learning algorithms to Automate the entire process .
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