Offering UBI Increases Customer Retention for Fleet Insurers–LexisNexis Study

The study finds a significant gap in demand for commercial Usage-Based Insurance and current enrollment rates, which indicates a proportionate opportunity for insurers to raise awareness and drive adoption.

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The 2015 LexisNexis Commercial Usage-Based Insurance Study has found that more than half of small fleet managers are likely to stay with their current insurance carriers rather than switching if their insurer offers usage-based insurance (UBI) programs. The annual study, conducted by LexisNexis Risk Solutions, also found that 25 percent of commercial fleet managers of all sizes would enroll in UBI, but current usage rates are only at six percent.

Deke Phillips, Director, Commercial Insurance, LexisNexis Risk Solutions.

Deke Phillips, Director, Commercial Insurance, LexisNexis Risk Solutions.

“There is a significant gap between the estimated demand for commercial UBI and current enrollment rates,” comments Deke Phillips, Director, Commercial Insurance, LexisNexis Risk Solutions. “This indicates a substantial market opportunity for insurance carriers to raise awareness and eventually adoption, especially with small fleets of two-to-five vehicles. More insight into the driving behavior of commercial drivers will benefit insurers by knowing the risks on the road, and driver feedback methods have the potential to improve driving and positively impact everyone on the road.”

Several findings of the study indicate an opportunity for insurers to target small businesses and their small fleets, including the following, according to LexisNexis:

  • Estimated demand for commercial UBI among 2-5 vehicle fleets is at 24 percent.
  • Estimated demand in small fleet commercial UBI is 10 percent greater than that of consumer demand, consistent with last year’s findings.

UBI also has the potential to be a strong retention and acquisition tool for commercial insurance carriers according to the findings, LexisNexis asserts. Sixty percent of small fleet managers said they would be less likely to switch insurance providers if offered UBI with a 10 percent discount. At the same time, if an alternate carrier were to offer a fully loaded UBI package, including insurance at a 10 percent discount and fleet management services, provided through a fleet manager’s preferred technology, more than half of the respondents would be likely to switch carriers.

(Related: UBI Platform Selection: Will You Bet on OBD or Mobile?)

The study results are similar to the vendor’s 2014 LexisNexis Insurance Telematics Study, in that small fleet managers find benefits in value-added services, but these services are not a significant driver in adoption of commercial UBI programs. The study also found that smartphones, which present a low cost entry to adopting an UBI program, are appealing since most costs are paid for by employers. Employee barriers related to the cost and data usage of using their personal smartphones for UBI is relatively small.

 

Editor’s Note: For more IIR reporting on UBI and Telematics, see the following:

Does Smart Phone-Based UBI Adequately Assess Driver Risk?

Getting Usage-Based Insurance Right: Does Mileage Matter Most?

Q&A: Salt Creek Analytics’ Case for Smartphone App, Mileage-based UBI

UBI Vendor Acculitx Secures $1M in Series A Funding

Driveway Software and Pinnacle Partner on Intelligent Usage-Based Insurance

LexisNexis Reinforces Commitment to Telematics with Wunelli Acquisition

After Telematics: What Smart Homes Mean for Insurance Product Innovation

Insurers Should Take Care in Choosing UBI Technology Partners – Aite Group

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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