The majority (98%) of motor insurers face challenges adapting portfolios to meet the demand for usage-based insurance (UBI), according to a new report from Software as a Service (SaaS) insurance platform By Bits.
Its report, A Customer-first Future for Motor Insurance, revealed that half of motor insurers said that time to market and speed of deployment were the most common issues around UBI products.
By Bits also identified concerns around cultural resistance to UBI, especially around automation (40%) and the cost of deployment ad implementation (35%).
Meanwhile, some insurers cited a lack of knowledge (23%), customer resistance (20%) and a lack of confidence (12%) as obstacles to offering UBI products.
Callum Rimmer, By Bits’s founder and chief executive, said: “While it’s understandable that insurers are somewhat hesitant and uncertain [about UBI], most of these barriers are easily addressed with the right approach and support.
“The fact is that it has never been easier to introduce a usage-based offering.
”The technology is there and so is the consumer demand – there is now a huge window of opportunity for those insurers brave enough to get on the front foot and make it happen.”
Future of insurance
By Bits’s research looked at UK insurers and brokers, it included interviews with 102 senior decision-makers such as chief executives, managing directors, heads of product and innovation, operations directors and finance directors.
Over half of this sample (64%) of respondents worked for insurance companies, while 36% worked for insurance brokerages or intermediaries.
The report also found that the majority of insurers predict that UBI will become the norm within four years, with more than three-quarters claiming that this is an attractive proposition.
However, only 30% are currently offering or proactively looking to incorporate products with pay-per-mile pricing models.
By Bits revealed that motor insurance companies want help to bring usage-based policies to market in a timely and cost-effective way, navigating potential IT integration and product development issues.
Around 82% of insurers agreed they need to keep up with emerging data-driven ecosystems or they risk becoming irrelevant.
Meanwhile, the pandemic has created unique challenges too. By Bits found that 86% of motor insurers said that delivering digital transformation has been a challenge over the past 12 months, however 79% deemed keeping up with the competition already offering UBI challenging.
Rimmer added: “The retention that comes with delivering a more customer-centric and innovative proposition will allow insurers to dramatically increase lifetime revenue per policyholder.
“But in order to achieve these benefits, insurers need to develop the right mindset and skills to embrace innovation and change. They have to finally accept that the future of motor insurance will be very different to what they have known over the last 10 or 20 years.”
Looking to the future, By Bits found that more than half (54%) of insurers believe they will need to integrate usage-based offerings into their portfolios and adopt a more data-driven approach to achieve sustainable risk management.
By Bits is a spin-off business from motor insurance insurtech and broker By Miles, which co-founded the SaaS platform in January 2021.