UBI: Finding customer value to drive success

“Do no harm.” That’s part of the Doctor’s oath, and it was the underlying thinking behind Progressive’s latest launch of Usage Based Insurance (UBI) into the US Insurance market back in 2010. Their message was straight forward – try our Snapshot device and your insurance premium will only go down, and how far down depends on how well you drive.

Fast forward 5 years. With “Flo” hammering the virtues of UBI, Progressive is claiming over 30% of their direct private motor customers are now using UBI. $2.5billion in annual premium is now emanating from UBI and nearly every tier 1 carrier is presently emulating Progressive’s successful UBI format. Meanwhile, Progressive recently announced in March 2015 that they are going to charge higher premiums for the worst behaving drivers on their books, effectively dumping the concept of “Do no harm.”

A Mountain of Data

Progressive's Advertising

Progressive’s UBI Advertising

And why not? As the pioneer of UBI in the United States, Progressive has accumulated the trip data of millions and millions of customers over a number of years – tens of billions of miles of journey data coupled with hundreds of thousands of claims – effectively giving them unique insights into the behaviors that cause accidents.

Based on listening to customers, their marketing program has now shifted from “Plug it in. Drive. Save.” to the concept of “Rate suckers” – “bad” drivers getting a free ride on the premium paid by “safe” drivers. Progressive’s research showed that 89% of drivers would be upset to find out that their premiums were subsidizing bad drivers. So loading the premiums of bad drivers simply backs up their marketing message and should further fuel the positive selection of good drivers over to Progressive, while chasing away the bad drivers to cheaper less data savvy carriers.

This adverse selection for Progressive’s competitors will eventually move the market to fully data driven underwriting over the medium term.

UBI is not your typical insurance product

All this goes to show that UBI is not your typical insurance product. Keys to success for Progressive have been:

  1. the ability to accurately model the risk and develop a compelling pricing model based on the new data made available from the telematics device
  2. the creation of an attractive customer value proposition
  3. educating the market about the benefits of the proposition with a targeted campaign
  4. implementation of the operational processes which deliver on the promise of the marketing message

Many insurers get dazzled by the telematics gadget and technology and lose sight of the fact that success really turns on delivering a compelling customer proposition fueled by deep customer insight. I still find it intriguing that many UBI RFIs and RFPs are being run like a technology procurement proposition. The realization has yet to dawn that the proposition will only be truly successful when the strategy, marketing, product development and operations teams become directly involved.

The fact is the technology is quite straight forward. Arguably the hardest part is finding where to plug-in the telematics sensor on the vehicle (well it was for me and those who know my physique will understand why). Usually data starts to flow almost immediately and drivers start getting scores the following day. However, that UBI plugging-in and data flow marks a “moon landing” as your relationship with the insurance customer will be forever changed.

Changing the customer proposition

Let’s face it, in the past, a customer usually shopped for the cheapest price of motor insurance, bought it and then tucked the policy away in the glove compartment of the vehicle with little or no contact with the insurer until it came time to claim or renew. With UBI, the insurer provides the customer with a companion mobile app (and website) which gives daily feedback on their driving skills and opens up a range of value-added services like:

  • Real-time vehicle location viewing
  • Teen safety monitoring (geo-fencing)
  • Driver feedback (rating, score) on tips to improve driving style and reduce accident risk
  • Trip replay functionality with mapping
  • Driver behaviour indicators (harsh braking, reckless driving, acceleration) within trip
  • Logbook – trip information – tax and fuel log expense claims
  • Parking meter reminder
  • Vehicle fault notifications
  • eCall (emergency / panic button) and bCall (breakdown)

You may have noticed I have skirted the issue of “push” marketing offers, which this connectedness will certainly open up. If handled with the mindset of truly benefiting the customer then this could be a good thing, but it’s a fine line between helpful and “spam.” I have advocated elsewhere that dynamic affinity offers when coupled with a high degree of personalization will present much greater value to the customer, rather than the scatter gun coupon book approach that typically prevails today.

UBI in China

In China, during the last two years, a number of insurers have piloted UBI propositions in advance of deregulation. Value-added services have figured prominently in most of them. Some have offered a flat 10% premium discount for simply trying out UBI. PICC, in partnership with Tencent and Shell, launched their “Lubao” box in early 2014. It’s a plug-in device which connects to a mobile app, which displays the current status of the car, runs routine diagnostics checks, offers advice on fuel-saving driving techniques, discounts on Shell products, provides proactive road-side assistance, and funnels all that data back to the insurance company and its partners. It seems like a dress rehearsal for rolling out a full “Progressive-style” pay-how-you-drive insurance program when regulations allow. Other insurers have offered time-saving value-adds like streamlining the payment of traffic violations, which I am told can be quite inconvenient in China.

Different Markets – Different Customer Propositions

In Thailand, women’s safety while driving has been seen as a good landing-place for the UBI proposition, with a “Panic” button being built into the app. In other markets, where organized fraud is rampant, UBI provides the data to effectively be a silent witness to what really happened and protect the interest of the customer and the insurer.

In Ireland, I recently read of a fraud ring that was systematically targeting drivers on country-side round-a-bouts and making phony whip-lash claims at over $20,000 per person. The data from the UBI device would help stamp out those kinds of claims, sparing the customer from the resulting increased premiums and months and months of stress and mental anguish during the claim settlement process.

In the United  Kingdom and the US, the advent of UBI has been the key to making insurance affordable for young drivers and their families.

In Europe, where discrimination based on gender was banned, a new insurer, Drive-like-a-Girl, launched a telematics proposition quite similar to Progressive’s, where anyone with good driving habits (hence, drive like a girl) earns a discount eliminating the need for proxy rating factors such as age and gender.

UBI: Win, win, win

The UBI proposition winds up being quite beneficial all around. Firstly, the community wins with improved road safety and easier to understand motor insurance contracts – pay for what you use. Secondly, customers win with cheaper insurance with the ability to control the cost by improving their skills plus they get a whole range of new features from vehicle fault monitoring through to faster claims settlement. Finally the insurer wins, as they accurately monitor risk and use data to find new ways to engage customers – moving the conversation from price to value and potentially establishing life-time brand associations with their customers.

Do no harm. It’s certainly a good starting place as it gets you thinking from the customer’s perspective, but UBI presents a whole lot of value just waiting to be unleashed for everyone – just find what’s most important for your customers and you should have a success when you launch your UBI proposition.

See you in the parking lot 🙂

An earlier version of this article originally appeared in the Asia Insurance Review, May 2015 edition.

I hope you had as much fun reading this as I did writing it. If you did, please let me know by hitting the like button. If you want to see more of my “off the wall” comments, you can follow me on Twitter @ITInsuranceGuy. Finally, I am keen to hear what you have to say, so please use the comment panel and share your views.


  1. Good article, thanks, although a year old, still very relevant messages, particularly for the Scandinavian countries, lacking behind the US


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