What are the steps to implementing usage-based insurance pricing?

1 Choose a UBI model

There are different ways to collect and analyze driving data for UBI, such as pay-as-you-drive (PAYD), pay-how-you-drive (PHYD), or manage-how-you-drive (MHYD). Each model has its own advantages and challenges, depending on the data sources, methods, and criteria used. Insurers need to choose a UBI model that aligns with their business goals, customer segments, and regulatory environment.

2 Select a technology partner

UBI relies on various technologies, such as telematics devices, mobile apps, or connected cars, to capture and transmit driving data. Insurers need to partner with a reliable and experienced technology provider that can offer the best solutions for their UBI model, as well as ensure data quality, security, and privacy. The technology partner should also be able to integrate with the insurer's existing systems and processes, and provide ongoing support and maintenance.

3 Develop a pricing strategy

UBI pricing involves setting the base rate, the variable rate, and the discounts or surcharges based on the driving data. Insurers need to develop a pricing strategy that is fair, transparent, and competitive, as well as compliant with the relevant regulations and standards. The pricing strategy should also be flexible and adaptable to changing market conditions and customer preferences.

4 Launch a pilot program

Before rolling out UBI to the entire market, insurers need to test and validate their UBI model, technology, and pricing through a pilot program. A pilot program allows insurers to collect feedback from a small group of customers, identify potential issues and risks, and measure the performance and impact of UBI. A pilot program can also help insurers refine their UBI value proposition and marketing strategy.

5 Market and promote UBI

UBI is a relatively new and innovative concept for many customers, who may have questions or concerns about its benefits, costs, and implications. Insurers need to market and promote UBI effectively, by educating customers about how UBI works, how it can save them money and improve their safety, and how their data is protected and used. Insurers also need to leverage various channels and incentives, such as social media, referrals, or rewards, to attract and retain UBI customers.

6 Monitor and optimize UBI

UBI is not a one-time project, but a continuous process that requires regular monitoring and optimization. Insurers need to track and analyze the data collected from UBI customers, such as their driving patterns, behaviors, and preferences, and use it to improve their UBI products, services, and pricing. Insurers also need to monitor the customer satisfaction, retention, and loyalty, and address any issues or complaints that may arise. Additionally, insurers need to keep up with the latest trends and developments in the UBI market, and adapt their UBI strategy accordingly.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?