Obstacles to Wider Acceptance of Usage-Based Auto Insurance Remain

Usage-based personal auto insurance may be drawing ever-increasing attention. Its wider adoption is stymied, however, by customer age and demographics, privacy concerns, misunderstanding about the technology, and even contentment with existing coverage.

That’s according to a survey from Standard & Poor’s Global Market Intelligence, which found that a little more than 11% of respondents who own a smartphone and have a drivers license said they installed their insurance company’s usage-based insurance mobile app.

According the poll by S&P-owned 451 Research’s Voice of the Connected User Landscape, out of that number, just 9% actively use it.

Age is a factor, although adoption rates are low across the board. Usage-based driving apps had adoption rates of 17.1% among Generation Z (born between 1997 and 2012) and 15.5% among millennials (born between 1981 and 1996). But less than 8% of Generation X (born between 1965 and 1980), baby boomer (born between 1946 and 1964) and senior respondents said they had a usage-based insurance mobile app installed, according to the statistics.

Still, S&P contends that usage-based insurance continues to have potential. Approximately 35% of respondents said they would either be somewhat or very interested in using a UBI mobile app.

“The survey results show that auto insurers have the opportunity to win converts to UBI coverage, particularly among many younger adults who have not become early adopters,” S&P’s Tim Zawacki wrote in the analysis.

How to win converts is the question. Zawacki says “the process of convincing some customers to change the nature of their auto insurance coverage may be more akin to winning new business than cross-selling ancillary products.”

The survey was conducted online in July 2021 among 1,121 licensed drivers.

Additional results:

• More than 21% of respondents with household incomes between $125,000 and $249,000 said they would be very interested in installing a UBI mobile app. Just 11.2% of respondents with incomes between $25,000 and just under $50,000 said they’d want to install the app. That number drops to 9.1% for those with household incomes below $25,000.
• Close to 23% of respondents said that they don’t have a UBI because of privacy concerns.
• More than 28% of respondents said they don’t have a UBI app because they’re content with their existing coverage. That contentment number hits 40% for seniors but drops to just under 20% of Generation.
• A bit more than 15% of respondents said UBI apps are too complicated. That drops to 7.2% for baby boomers but was a top concern for Generation Z.

S&P’s analysis notes that digital insurance startup Root is betting its business model on UBI. Others, such as GEICO and USAA, are also rolling out their own efforts.

The full S&P article is “Survey finds customer inertia stymies private auto UBI adoption.”