It’s difficult to predict what the personal auto insurance market will look like by the turn of the next decade, but even conservative estimates indicate telematics and usage-based insurance (UBI) will become a catalyst for change, according to a recent Strategy Meets Action research paper.
Richard Welch, a former insurance CEO, is a guest author of the SMA report along with SMA partner Mark Breading, believes that even with just 10 percent of the market in 2020, that still means 25 million cars will be insured through some type of UBI program.
In the U.S., devices that are self-installed by consumers and tie-in to the diagnostic port on the vehicle are dominant. Welch contends the use of smartphones could change that pattern.
“Smartphones can do everything you need to get the data run to a UBI program, but there are some challenges associated with smartphone technology that make underwriters less comfortable,” says Welch. “The promise of the smartphone is there’s no hardware to deploy and it’s easy to get it out to a lot of places quickly.”