Time to Pop the Question – Engage With Consumers Maturing UBI Into a Mass Market Proposition

Usage-Based Insurance or UBI is at the embryonic stage and has a long way to go before turning into the norm of insurance. With that being said, there is no denial that UBI will become the future of auto insurance. While it has already started laying the foundation, the question still remains: How is UBI going to appeal to consumers? How is it going propel into a mass market proposition?

Usage-Based Insurance, as the name suggests, has two popular auto insurance models – pay as you drive and pay how you drive. The pay-how-you-drive model uses advanced telematics technology, where driving data as detailed as a hard brake or rapid acceleration can alter insurance premiums. Such detail-oriented system can change not just insurance but reform driving completely. Focusing on the USPs of Usage-Based Insurance can most definitely attract the auto insurance market.

Pay How You Drive

Initially, driving information was captured for the purpose of investigating accidents or insurance claims. However, the need arose to take this technology a step further leading to the initiation of pay how you drive. The implementation of this model requires capturing driving data in real-time – calculating every rapid acceleration and hard brake, average speeds, frequency of driving, usage information like locations, parking, etc. and combining them with historical data to draft an insurance plan and allocate premium values.


Any initiative that can save money will appeal to the mass market. With an economy that is as rough as sailing through the Bermuda Triangle, consumers are constantly looking for avenues to that can cut costs. Usage-based model of insurance combines telematics, analytics and shared data to calculate an insurance policy that does not burn the pocket. Insurance premiums are decided based on this data. For instance, if the policyholder does not use his vehicle much and is a very careful driver, his insurance premium will be relatively less.

Even insurance agencies benefit from this model. In the event of a car crash, for example, telematics can capture real-time driving data and determine how the accident exactly took place and what damage was done avoiding fraudulent claims and reducing the risk of losses.

Incentive-based System and Customizable Features

A cautious driver pays far lesser than a reckless one. However, improvement in driving does not go unrewarded. Who does not love rewards and perks! UBI uses an incentive-based system to encourage better driving. If the insured improves his driving style, his premium amounts are bound to reduce.

Apart from that, insurance providers offer other customized features that differ from one insurer to another. These features can include driving tips, roadside assistance, Geo-fencing, location information like fuel stations, eateries, etc.

Conditioned to Drive Safely

B.F. Skinner had conducted an experiment to study the effects of rewards and incentives. He put a guinea pig in a box that has a lever fitted inside. Every time the guinea pig pressed the lever a food pellet would fall out. The number of times the guinea pig pressed the lever in a day increased gradually. This behavior modification through a reward system is called operant conditioning. Humans yield to rewards as well. This principle has been used in various fields of education, human resource management, marketing, etc. and generated good results.

UBI inculcates this principle in its incentive-based model to encourage people to drive safely. Not only does this model save money for both the insurer and the insured but also encourages better-quality driving – a win for all stakeholders.


There are a few concerns that need to be addressed. Privacy issues top the list, as people are concerned about divulging details of their whereabouts. The other concern is regulating the method of collecting data so that clients can transfer their data to another insurance provider and avail benefits without having to start from scratch.

UBI is still at the infancy stage, and thus these concerns will be addressed in the course of time. However, these challenges outweigh the benefits that UBI has to offer.

These are UBI’s competitive advantages that can drive UBI into a mass market proposition. It is essential to educate the masses on how UBI can transform the auto insurance into a system that is profitable for all parties and socially responsible. Insurers can use this tool not only for offering insurance solutions, but also for marketing purposes through consumer engagement features. The policyholders will pay as they drive which can result in better driving.

Usage-Based Insurance is a multifaceted system of reduced costs, customer engagement and inspiration for responsible driving. The ultimate outcome of UBI will be the contentment of insurance providers, their respective clients, and the society at large

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