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Agent’s Guide to Usage-Based Insurance and Telematics

JUN. 16, 2020

Highlights:

  • Drivers can save on car insurance from policies tailored to personal driving habits
  • Many want to know about usage-based insurance and pay per mile insurance
  • Some common misconceptions, or myths, are easily busted

The days of the “one-policy-fits-all” approach to auto insurance are ending as consumer seek coverage tailored to their personal driving habits. For many consumers, usage-based insurance, also known as UBI, is a new concept. And consumers are looking to their agents to best understand if usage-based insurance is right for them.

Benefits of selling usage-based car insurance

Talking to your clients about usage-based insurance can strengthen retention and help them save money now. Customers who participated in the SmartRide® program had first term retention rates over 5 percentage points higher than the Nationwide average. Even though some customers might require a rewrite, usage-based insurance provides discounts based on driving patterns and behaviors. Nationwide launched its telematics offerings 8 years ago, providing years of experience in the usage-based insurance space.

What is usage-based insurance?

UBI policies collect information about a person’s driving habits to provide coverage based on how they drive. Some usage-based insurance options are based on how safe you drive (SmartRide®), others on the number of miles you drive (SmartMiles®). A recent survey1 by JD Power found consumers expect their average miles driven to remain low and say they are more willing to consider usage-based insurance due to COVID-19.

How is data collected?

After the insured enrolls in a UBI plan, data is captured using a mobile phone application or a small plug-in device installed in the vehicle. In the future, drivers of newer car models could enable their vehicle’s built-in technology to transmit data for a more seamless customer experience. Common data types collected include miles driven, hard braking, fast acceleration, and nighttime driving. What data is collected depends on the UBI plan.

How does SmartRide and SmartMiles benefit customers?

Safe drivers can save up to 40% in Nationwide’s SmartRide® program, and are eligible for a 10% discount upon enrollment2. The SmartMiles® pay per mile insurance program is saving lower-mileage drivers on average 25% over a traditional Nationwide policy, and they can also earn up to a 10% discount for safe driving3.

Answers to common usage-based insurance myths

Myth #1: Customers can’t trust an insurance company with this data.

Answer: The data collected by Nationwide is used for insurance purposes and never sold to any third-parties. Drivers can easily see their driving data that is gathered through the app or online web portal. The data collected serves as a way of providing safe driving feedback. Nationwide takes members data security very seriously and uses security measures to protect their privacy.

Myth #2: Driving data will be used to increase insurance rates.

Answer: The point is to help people learn to be safer drivers, not penalize them for unsafe driving. Nationwide won’t increase rates for participating in our SmartRide program. Every SmartRide participant is eligible for a 10% discount upon enrollment. Any discounts earned will be maintained for the life of the policy. If they don’t qualify for additional discounts because of unsafe driving habits—they wouldn’t get a SmartRide discount at renewal.

Myth #3: The process to enroll and activate a UBI plan is too complex.

Answer: Even though some customers will require a rewrite, it is a great time for agents to proactively reach out to help their clients understand the benefits. The enrollment process for these programs is actually very easy. Plus, the discounts customers earn are automatically applied—and they can be significant. Currently, there are options to enroll in SmartRide with a mobile app or by installing a small device in the vehicle. It takes only a few moments to install the device, and most people can easily do it themselves without any special skills or tools.

Watch how a telematics device is installed
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Watch how to install the device

 

Sources

  • 1

    J.D. Power Insurance Intelligence, Insurance During COVID-19, Consumer attitudes and perceptions

  • 2

    SmartRide program availability varies; program criteria differ in California and North Carolina. Stated discounts are approximations. Discounts do not apply to all coverage elements; actual savings vary by state, coverage selections, rating factors and policy changes. The enrollment discount applies during data collection; the final discount is calculated according to driving behavior and could be zero. The final discount applies at the next policy renewal and is subject to change based on actuarial support at subsequent renewals or with changes in drivers or vehicles on the policy.

  • 3

    SmartMiles savings based on national data through February 2020. Program availability varies. SmartMiles includes a base premium plus a variable premium based on the coverages in force and the days and miles driven.