MEDFORD, Mass., Sept. 5, 2012 /PRNewswire/ -- Dave Ferrick, President of Agero's Roadside Assistance and Insurance Services business line holds responsibilities for the deployment of innovations for roadside assistance and the post-accident, auto insurance claims side of the business. Agero is uniquely positioned in the industry as it sits between automotive OEMs and auto insurance carriers. Mr. Ferrick participated in a lengthy Q&A session regarding connected vehicle and usage-based-insurance (UBI) trends that are converging and will have broad implications for both industries going forward. His session is summarized here, with the full dialogue available for download.
UBI is known as "pay as you go" insurance and blends together variables such as the type of vehicle used by the driver, the time spent driving, distance, and various other measurable behaviors. Mr. Ferrick states the industry has been slow to adopt UBI initially because of technology barriers and cost, both of which are being lowered through innovation. The insurance industry needs to see how much driver buy-in there would be for a UBI setup where the tradeoff for the consumer is lowered premiums. For carriers, more of the benefits of UBI are being quantified, including the reduced costs from fewer and smaller claims, better premium pricing and risk assessments, and reduced incidence of fraud.
Mr. Ferrick discusses the likely delivery methods for UBI, with most OEMs looking to embedded systems which both encourage safety and reduce thefts. Mobile application-based solutions are another option that do not have the same hard costs, but is not as secure as embedded as the driver could disable or alter the application. In order for UBI to be effective, the insurer needs to collect multiple driving data points including mileage, time of day, and type of road conditions, excessive speed numbers, seat belt usage, and maintenance alerts, among several others.
Once drivers hear the words "connected driving" or "tracking", they might initially have concerns about their privacy. However, Mr. Ferrick notes carriers and OEMs can lay out reasons why the benefits of such embedded tracking outweighs the risks and how consumers already share a considerable amount of data through online cookies, location-sharing apps, and other situations. The key for carriers will be to ensure there is transparency about the collection and usage of the data, in order to encourage them to choose flexible personalized premiums.
The value proposition for UBI is high, as once it is proposed, many drivers will see the arbitrariness in their current premiums and understand the benefits of paying based on an actual risk profile. For parents of teen drivers, the benefits of such connected driving will include not only monitoring, but positive reinforcement for good driving habits. For fleet management firms, connected driving can lead to reduced wear and tear, better on-time performance, and improved logistical planning.
Mr. Ferrick considers a more holistic approach to be necessary for the changing roadside assistance and insurance industry. Beyond using UBI to identify safe drivers, it can also aid fast accident notification, emergency response, and better management of vehicle removal. If UBI is integrated with insurance claims management systems, data can be shared in completely new ways, such as immediate accident notifications sent to the carrier. This can drastically accelerate the timing of the claims process, with the insured individual receiving a rental car or other arrangements much sooner. For the insurance carrier, faster service means more satisfied and retained customers.
Mr. Ferrick discusses the incentives that exist for automotive OEMs to place insurance telematics inside every vehicle. For example, more than 30% of car owners that are in an accident where their vehicle is considered "totaled" will purchase a replacement car from another car maker. Without telematics, the car manufacturer and dealer cannot be alerted to such a scenario and therefore cannot reach out to the driver to encourage them to purchase another one of their vehicles. Theft prevention is another benefit of telematics, where proactive notification of theft can generate remote immobilization and reduce the incidence and related costs of theft.
Mr. Ferrick envisions his company moving deeper into cloud-based driver information systems that connect the driver, insurance provider, and car manufacturer to the car's telematics. This shift will also affect Agero's roadside assistance business, with mobile applications enabling more accurate mapping and vehicle identification and driver arrival alerts. The growth of electric vehicles and worries about range means Agero will operate a larger fleet of mobile charging platforms, with telematics providing advanced data to the driver and the fleet operator.
Mr. Ferrick sees telematics transforming auto insurance, with successful providers offering UBI-based policies by the end of the decade. Driver behavior coaching will also become more standard, with integrated telematics and mobile applications working in tandem to show drivers their patterns and how behavior can affect premiums. These applications can even have a "game" component where the driver is challenged to reach certain good driving behavior levels. Another possible integration is with voice-recognition systems that relay to the driver the best practices to perform after an accident occurs, in addition to the system calling the police. Access to real-time weather data will also alter how drivers react to changing conditions, for example finding cover when a localized hail storm is reported.
For a complete question and answer dialogue with Mr. Ferrick detailing UBI, telematics, and the broad implications for drivers, insurance carriers and OEMs, visit http://www.atxg.com/news-events/news-releases/2012/09/04/461/ageros-dave-ferrick-leads-new-holistic-approach-usage-based