Telematics Tipping Point: Usage-Based Insurance to Dominate Auto Insurance by 2020

BOSTON, Dec. 13, 2012 /PRNewswire/ -- Strategy Meets Action (SMA), a leading insurance strategic advisory firm, announces a new research report, Usage-Based Insurance/Telematics: a Catalyst for Change. Results from SMA's survey of North American property and casualty insurers indicate that 75% of insurers believe usage-based insurance (UBI) will fundamentally alter the auto insurance industry between now and 2020.

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"Insurers have been experimenting with telematics for 15 years. Now, telematics is rapidly gaining momentum, and every auto insurer should be thinking about their plans for telematics and usage-based insurance," said Mark Breading, co-author of the study and SMA Partner. Co-author Richard Welch of REW Consulting sees the industry nearing a tipping point. "Telematics is going to have a profound effect on the auto insurance business," said Welch. "Even if consumer adoption is in the low end of the consensus range, usage-based insurance will grow rapidly, and as it grows, the traditional market will shrink, making it very difficult for companies not playing in the usage-based segment to maintain market share."

Highlights of the study include:

• 70% of North American property and casualty insurers are engaged in some stage of usage-based insurance, whether they are operating active programs, conducting pilots, or building strategies.
• Almost 20 auto insurers are now running UBI programs in US and Canadian markets.
• 8 of the top 10 US companies now have UBI programs or pilots underway.
• The most frequently used variables in UBI programs are mileage, time of day, speed, and hard braking.
• The key challenges insurers face in building successful UBI programs are managing technology costs, understanding loss experience, creating consumer demand, and overcoming patent issues.

The SMA study assesses the features and benefits of the current UBI programs in the marketplace and looks at the implications for consumers and insurers. Also addressed in the report are the types and ownership of the telematics devices, details on the collected data, how the data is used, and the key challenges to the growth of UBI.

Insurers, IT providers, and media interested in learning more about SMA's usage-based insurance research and consulting services should contact Mark Breading at [email protected] or (614) 562-8310.

More information about SMA is available via the following options:

• About SMA
• Offerings for Insurers
• SMA Published Research

About Strategy Meets Action

Exclusively servicing the insurance industry, SMA is a strategic advisory firm offering a unique blend of research, advisory, and consulting services to insurance companies and IT solution providers. By leveraging best practices from both management consulting and research advisory disciplines, SMA's advisory service offerings are actionable, business driven, and research based – where strategy meets action.

SOURCE Strategy Meets Action