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Drivers Give the Green Light to Usage-Based Auto Insurance

A new Agent Authority survey released this week by Nationwide found that more auto insurance customers are ready to give usage-based insurance a try, giving agents an opportunity to grow their business and enhance relationships.
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drivers give the green light to usage-based auto insurance

More auto insurance customers are ready to give usage-based insurance a try, presenting insurance agents an opportunity to grow their business and enhance relationships, according to a new Agent Authority survey released this week by Nationwide.

“Nationwide expects the trend in usage-based insurance to increase drastically over the next five years, projecting 70% (or more) of new business to come from our usage-based insurance programs," says Teresa Scharn, vice president of personal lines product development at Nationwide.

“The pandemic has accelerated us meeting those projections," she says. “We have seen 35% of new business choosing one of our usage-based insurance programs since March. The days of a 'one-policy-fits-all' approach to auto insurance are over."

“The shift in people working from home and changing their driving frequencies has caused consumers to reevaluate their insurance needs," she adds. “Many people are looking for ways to exercise more control on ways to save now."

While the survey found that two-thirds of personal lines consumers would allow a telematics device to capture their driving behavior if it provided a discount, many consumers and agents are unaware or misinformed about some of the finer details of the product. Despite growing interest, as many as 67% of consumers have not discussed telematics with an insurance agent and only 10% of consumers report using one, according to the survey.

The Agent Authority survey also highlights misconceptions consumers hold about the cost associated with telematics. A quarter of consumers who don't currently use a telematics device believe there is an added cost to using one and more than half believe using a telematics product could make their rates go up, the survey found.

Agents can address misconceptions about price by “having a clear value proposition and simple talking points," which are “key to getting consumers past their misconceptions and concerns," Scharn says. “Customers are saving on their insurance with telematics."

Meanwhile, the survey found that 40% of insurance agents don't feel knowledgeable enough to counsel clients on telematics. While the majority of agency principals (79%) feel well-versed in telematics, their staff is less confident—with 63% of producers and 32% of customer service reps saying they are confident providing resources.

“Insurance is typically viewed as a commodity, but customers want something they can control," Scharn says. “Agents have an awesome opportunity to offer something unique that can differentiate them from other agents and direct competitors. Taking the time to understand at least one industry-leading telematics program available for sale in their agency will enable them to be a trusted advisor for their clients."

Privacy is still a cause for consumer apprehension—with six in 10 consumers expressing concern about the information telematics is capturing. However, the survey also showed that this barrier may be easy to overcome and lead to a conversation about telematics discounts as 65% of respondents say they would allow a telematics device to capture their driving behaviors if it provided them a discount.

To combat the fear around privacy, “agents should make clients aware that they can easily see their driving data through the app or online web portal," Scharn explains, also suggesting that telematics programs can actually provide better transparency around price.

“We utilize the data in usage-based insurance to provide customers more control over their insurance premiums," she says. “It provides safe driving tips to help them save even more, and it provides actual mileage results, so customers understand their pay-per-mile premiums in real-time."

Another misconception is that there is a certain consumer profile that benefits and is interested in usage-based auto insurance. However, Scharn “does not see one, or a set of specific profiles, who are more interested in usage-based insurance," she says. “We see a similar interest in usage-based insurance programs across all age groups."

“What is important is that customers understand the benefit of the program," she adds. “Not only does this give them a compelling reason to switch insurers, but it also presents a compelling reason to share data."

Will Jones is IA editor-in-chief.