State of the UBI Market · 4 Current market penetration Insurance Group 2014 NWP (000's) 1. State Farm Group 35,372,515 2. Berkshire Hathaway Insurance Group 20,552,102 3. Allstate

September 24, 2015

Gary Wang, FCAS, MAAA

Michael Chen, FCAS, MAAA

State of the UBI MarketShifting UBI Strategies and Market Sentiment

1

About the presenters

Gary Wang, FCAS, MAAA

Consulting ActuaryBloomington, Illinois Office

Michael Chen, FCAS, MAAA

Consulting ActuaryDes Moines, Iowa Office

2

Survey of the current market environment

3

What percent of the market has a UBI based personal auto insurance policy?

1%

5%

10%

15%

20%

A

B

C

D

Polling question #1

E

4

Current market penetration

Insurance Group 2014 NWP (000's)

1. State Farm Group 35,372,515

2. Berkshire Hathaway Insurance Group 20,552,102

3. Allstate Insurance Group 18,836,252

4. Progressive Insurance Group 16,374,660

5. USAA Group 9,824,529

6. Liberty Mutual Insurance Companies 8,445,483

7. Nationwide Group 7,258,632

8. Farmers Insurance Group 7,249,243

9. American Family Insurance Group 3,516,209

10. Travelers Group 3,389,868

11. Hartford Insurance Group 2,623,599

12. Erie Insurance Group 2,357,010

13. Auto Club Enterprises Insurance Group 2,348,951

14. MetLife Auto & Home Group 2,238,005

15. Mercury General Group 2,219,159

16. CSAA Insurance Group 2,142,687

Progressive

Snapshot®:

2.6 Billion

5

• Progressive Snapshot®

– 2.6 billion premium written

– 12 billion miles of recorded miles

– 2.5 million participants

• Progressive® Insurance has formally chosen Censio to develop the software for the insurance company's leading usage-based insurance program, Snapshot. The company will begin a pilot of the mobile app with select customers across the country in mid-September.

-Sep 2, 2015

Keeping an eye on the leader

https://www.progressive.com/

http://www.cens.io/

6

Consumer reporting information

Installed device

Smartphone

Satellite monitoring

What would be your ideal UBI solution?

Polling question #2

A

B

C

D

7

• Mobile App solutions

– Allstate

– Progressive

• OEM systems

– Ford SYNC®

• State Farm

– OnStar

• National General Insurance

• State Farm

• Progressive

• VERISK!

Moving beyond the OBD-II port devices

8

• Verisk Telematics Data Exchange

– Verisk Insurance Solutions Announces GM as Inaugural Auto Manufacturer to Join Telematics Data Exchange.

-Sep 2, 2015

– Expected Rollout: Summer 2016

On the horizon – data exchanges and clearinghouses?

9

Considerations for a successful UBI pilot program

10


Sometimes starting a UBI program feels like:

Step 1:

Get UBI data

Step 2:

???

Step 3:

Profit!

11

We would argue that understanding the second step of what you will do with the data collected is an instrumental step to consider when setting up your UBI Pilot program.

Things to consider:

• What is the motivation for implementing UBI?

For use in rating plans

For use outside of rating (claims adjusting or underwriting)

As a value add for insureds with youthful drivers

Everybody else is doing it


12

Things to consider for rating• What data will you initially use in rating? Are those data elements

collected by your device?

Mileage

Excessive Acceleration

Hard Braking

Speeding

Cornering

Time of day

Location

• Do you plan on updating the rating once you collect more of your own data?

Will additional data elements be used?

Are those additional elements currently collected?


13

Setting up a Pilot

• Devices

Multiple devices (mobile vs OBD-II)

• Participants

Team analyzing results

Cross section of demographics

• Measures a wider range of responses

• Goals of the Pilot

The goal is not to design a score since you will not get enough data

Understanding how a product will look


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Evaluating a UBI Pilot Program• Accuracy

How will accuracy of data be determined?• Survey

Pre-Pilot• Preconceived ideas

How good of a driver do they think they are?

Post-Pilot• Describing the Experience

• Multiple devices in a vehicle


15

Evaluating a UBI Pilot Program• Cost

Context of the cost • (mature vs youthful)• Area (city vs rural)• Market size

• Ease of Use Device and App and the interactive

experience Ways to cater to passive or active audience


16

When Evaluating

• How is data stored?

• How is the data accessed

– Short term like snapshot or continuous

• Hacking

– Near Field Communication

• Interference with vehicle operations

• How does the application determine a trip?

– User activated

– Activated in the background during the course of a trip

• Smart Phone battery usage


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What if the device makes a mistake?

Will it drain my phone battery?

Will they know everywhere I go?

Will one incident make my rates skyrocket?

Can this app/device be hacked?

What is the top consumer concern when signing up for a UBI based personal auto insurance policy?

Polling question #3

A

B

C

D

E

18

Top 3 frequently asked participant questions.

3) How accurate is the data?


19

Top 3 frequently asked participant questions.

2) How much will this drain my Smart Phone battery?.• Most application use 5-10% of the battery in a day dependent on

amount of driving


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Frequently asked participant questions.

1) Be prepared to address privacy concerns.

• Particularly related to location data

When many pilot participants are company employees some may be concerned that the location and date/time date may be used in other ways than evaluating a device for UBI.

– Example:

» Letting the wellness department know that an employee ate at a fast-food restaurant for both breakfast and lunch 20 of the last 30 days.

• Some of these concerns can be addressed by anonymizing data using ID numbers instead of names.


21

Seeing UBI from the consumer’s point of view

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• How can data on the UBI experience of consumers shape product development, pricing and customer service offerings?

• How important are UBI device options to the consumer?

• What are the expectations of the consumer regarding savings?

• What other services are important to consumers in a UBI program?

In the UBI of the consumer

23

• Analysis – sentiment of social media posts related to UBI programs

– Text mining

– Review of individual tweets

• Data

– Over 6.5 million insurance tweets total (January, 2012 to present)

– Keyword searches for terms related to UBI programs in US, UK and Canada

– UBI information collected since October 2012

Description of analysis - social media data

• Data fields

Content of the tweet

Specific tweet recipient

Sender of the tweet

Language of tweet

Where the tweet originated

Link to a picture of user

Latitude and longitude of the user

Date and time of tweet

User profile

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23.4%

18.2%

14.1%

13.4%

18.9%

24.4%

9.8%

12.2%

8.8%

15.8%

12.3%

16.7%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Privacy

Misunderstanding of Program

Rate Can Go Up

Concerned About Results

2013 Study 2014 Study 2015 Study

Non-customer negative responses - US

Pretty sure if I tried Snapshot, Progressive

would triple my premium.

Progressive Snapshot

'bombshell': Device can raise users'

rates

25

33.3%

30.7%

6.7%

10.7%

9.3%

47.0%

30.0%

10.0%

3.0%

1.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%

Can't Get A Quote

Uncompetitive Premium

Customer Service

Rejected by Portal

Misunderstanding of Program

Non-Customer Negative Responses - UK

2014 2015

Non-customer negative responses - UK

Conclusions1. Crossover effect2. Consumer education is key3. Entire experience has to be

positive

26

76%

14%

6%

4%

76%

14%

0%

2%

74%

7%

0%

13%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Savings

Excitement

Tracking

Better Driving


Positive customer responses - US

27

23%

16%15%

14%

10%

4%

24%

18%

20%

11%

1% 1%

16%

8%

22%

10%

2%

0%

0%

5%

10%

15%

20%

25%

30%

Driving Habits Beeping Snapshot Evaluation Annoying Premium Change Installation


Customer complaints - US

28

Customer complaints - UK

32.0%

13.1%

7.6%

14.8%

7.6%

6.1%

34%

18%

15%

6%

10%

0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Poor Customer Service

General Discontentment

Disagreement with Results

Problem with Portal

Didn’t save enough money

Installation

Complaints

29

Savings - US

2%

59%

85%

96% 94%

2%

6%

0%

1%0%

96%

35%

15%

3%6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Zero Less than 10% 10% to 19% 20% to 29% 30% and Greater

To

ne

Pe

rce

nta

ge

fo

r E

ach

Dis

co

un

t C

ate

go

ry

Reported Discount

Reported Snapshot Discount by Tone

Positive Neutral Negative

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• Vehicle malfunctioning

• Program confusion

• Vehicle hacking

• Customer service

Emerging themes

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• Value proposition has to be compelling for customers

• Device options are not as important as ensuring that the options work

• Ultimate customer satisfaction is dependent on customer perception of driving ability relative to UBI evaluation

• While value added services may increase the chance of conversion, the most significant reason for trying and staying with UBI is savings

• And even after all that…

Key conclusions

32

Market awareness

33

Pinnacle driving challenge

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Join us for the October Apex Webinar

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• We’d like your feedback and suggestions

• Please complete our survey

• For copies of this APEX presentation

• Visit the Resource Knowledge Center at Pinnacleactuaries.com

Final notes

36Commitment Beyond Numbers

Thank you for your time and attention

Mike Chen

[email protected]

[email protected]

Gary Wang

Documents

State of the UBI Market · 4 Current market penetration Insurance Group 2014 NWP (000's) 1. State Farm Group 35,372,515 2. Berkshire Hathaway Insurance Group 20,552,102 3. Allstate