Usage-Based Insurance and the Agency of the Future

Do you like paying for things you don’t use? Were there products and services that you didn’t want to pay for during the peak of the pandemic shutdowns because you weren’t using them? As insurance professionals, are we charging the right rate for the right product?  As a service provider to your clients, can we do a better job making sure clients see transparency in the pricing of the products we provide?  Did your clients question their automobile premiums when it was announced that they were receiving refunds?

I am pretty sure (really, really sure) that our carrier partners never want to have to return automobile premiums again. While the miles being driven has created reduced loss ratios for 2020, it was a systems and accounting mess. This time, agents were not charged return commissions, but what about next time? The concept of returning premiums has caused our clients to ask what they are paying for and what are they getting in return? 

Enter usage-based insurance. We’ve seen it for a while in payroll bill workers compensation insurance. Popularity is ramping up for private passenger automobile insurance. It is soon to enter the commercial automobile insurance arena. 

Does usage-based insurance fit in your agency’s growth plan? If it doesn’t fit now, you may want to find a place for it in the future. The clients of today, and tomorrow, are better educated with information available at their fingertips and they want transparency. Most clients, especially those utilizing independent agencies, are willing to pay for service and value, but does the traditional automobile insurance policy allow agents to provide these rapidly evolving consumers what they want?  Is the concept of many drivers paying set premiums for the coverage of a few, a concept that is nearing its end?  

We are in a data driven world. Third party data fills our screens. Carriers pull data so we no longer have the be data entry experts. Our watches track us down to the heartbeat. Our phones track our every movement (and every word….bye-bye Siri). Even our cars are now points of data, covering everything from manufacturing to traffic reports. Between data, smart cars, miles driven and driving habits can we provide our clients a better product? The simple answer is YES. Usage-based data helps our carriers price their product better. They have predictable data for claims, and we have a transparent and appropriately priced product for our clients. 

I get it, there are downsides to offering telematic or other usage-based products. Compressed premiums will reduce commissions, it’s a new product that requires education and some clients don’t want “big brother” in their lives. But there is a yin to that yang. A Deloitte 2020 Global Personal Lines Survey of US respondents showed over 50% of consumers surveyed are willing to share driving locations, driving style, credit history, car usage and insurance history to lower premiums. Usage-based insurance is a more accurately priced product; it meets the consumer’s need and it’s a step in the direction of insurance agencies and the industry as a whole, moving ourselves into the digital future. If clients don’t want it, they don’t have to purchase it and can still buy a traditional product.  

If I am not making the case here to find a place in your inventory for usage-based insurance, consider this: If you don’t offer it, your clients that want it will find it somewhere else.  If they don’t find it from another local agency, they can always just respond to the billions of dollars of ads on TV and move to the direct response carriers. Independent agents must continue to pivot and evolve in this digital world and this is one small step for our industry and one giant step for your agency!

Want to learn more about the agency of the future and how to build your own digital strategy? Insurance Agency 4.0 (www.mattmasiello.com/IA40) is available on Amazon for pre-purchase and will be available for distribution on November 1, 2020.