radical transparency in insurance

It’s Time for Radical Transparency in Auto Insurance

21 Sep 2019

In 2019, auto insurance rates climbed nationwide for a fourth straight year, showing no sign of turning around. Rates in 15 states are up 40% or more, and some states have been slammed with hikes as high as 80%.

Why the upward trend?

Taking most of the beating, commercial fleet owners remain frustrated with no tangible control over rates, no real way to lower costs, and no way to cut through the noise. Premiums can increase for reasons that are not always clear, regardless of their driving habits.

Auto insurers measure numerous factors to price risk, including your motor vehicle reports, your losses, your mileage, your location, and your demographics. The problem is that most of these components cannot be realistically improved, especially if you’re in the commercial fleet business. 

Because, think about it: while your mileage may have an impact on your auto insurance cost, if your job is to drive from point A to point B every day, how are you going to drive less? 

Same goes for location. If your zip code brings higher insurance costs, are you going to move for a better price? 

Not likely. And this is the source of frustration for many fleet owners.

Transparency Has to Be the First Step Forward

Bottom line is, you have zero control because there is zero transparency into what fleets can realistically do about lowering their costs.

According to Business Wire, “73 percent of drivers want auto rates to be determined based on how safely they drive; only four percent prefer traditional metrics.” These circumstances can feel daunting, overwhelming, and, most of all, out of their control. Again, this is what causes fleet owners to feel most frustrated. 

And yet it seems as if the rest of the world is doing the exact opposite: returning control to the end-user. Several other industries have embraced transparency in recent years, reaping the benefits to consumers and business owners thanks to new technologies. 

Why? Because transparency has gained more importance across numerous industries such as energy (smart-meters), healthcare (FitBit), and retail (Amazon). Consumers demanded it, and businesses finally listened.

Steps to Enhance Transparency in Auto Insurance

The first step in driving transparency into the auto insurance industry is UBI, also known as usage based insurance, or “pay as you drive.” Through this model, insurance costs are based on the vehicle’s use against time, distance, behavior, and place. As The Balance explains, the UBI model “allow[s] a telematics device to be installed in your vehicle, which in turn allows the insurance company to monitor your driving habits.” 

But this does not go far enough. It’s still a black box that provides no information on a driver’s personal behavior – most critically, distracted driving.

That’s where BBI, or behavior-based insurance, comes in. BBI measures driver distraction and more through phone sensors and machine learning. BBI is the more transparent and accurate evolution of UBI because it isolates the key indicators of driver behavior in the digital age.

Even commercial auto insurance companies are picking up and embracing new technologies and trends. Through telematics, companies like Fairmatic can analyze driver behavior, share real-time analytics, and update premiums each month based on driver safety (as opposed to each year). This model provides the ultimate solution for auto insurance providers and customers, helping to manage risks better and save fleet owners money in return.

The Benefits of Making Data More Accessible

BBI models leverage driver behavior to:

  1. Show you how you’re driving
  2. Show you how this impacts your premium
  3. Show you how to improve your driving behavior

This is important on a consumer level as well as a commercial level.

With this transparency, many commercial fleet owners can now use this data to better run their businesses because they can coach and train their drivers at no additional cost. 

Through measuring phone use and other behaviors, fleet managers can analyze every trip, improving driver coaching and solving for distracted driving.

The more data you can see, the more you can control. The era of transparency has hit auto insurance, and there are no signs things will slow down.

Rhea Harris

General Manager