Mobile applications will play a key role in the growth of usage-based insurance in 2014, according to Deloitte Consulting LLP’s Neal Baumann. Baumann also noted that an important part of that growth will involve smaller insurance companies using UBI to force larger carriers to improve the products they offer consumers.
A new study from Deloitte focuses on how a number of growing trends from 2013 will change and evolve in the new year. Baumann notes that most insurance providers will face challenges taking new ideas, like UBI, and integrating them with their traditional infrastructure.
“Developing strategies to better integrate and leverage existing and emerging data sources within legacy technology platforms and capabilities is proving to be a daunting challenge for many in the industry,” Baumann noted.
“As more and more carriers look to execute strategies to drive performance and reduce risk via leveraging data and analytics, insurers should be prepared to make the tradeoffs needed to develop capabilities that they believe will provide them with strategic advantages. In some cases, this might lead to the need to revisit and modify traditional business and operating models.”
Deloitte’s report took a special interest in usage-based insurance, which the firm believes presents a unique challenge for insurance carriers. Deloitte’s report suggested that the high start-up costs of implementing UBI models could discourage some smaller companies from becoming involved and that this could have negative consequences for consumers standing to benefit from UBI programs.
Therefore, Deloitte says smaller companies will need to use mobile applications (for smartphones and tablet computers) to draw clients and consumers to their UBI platforms. Baumann says that, because implementing mobile apps is relatively affordable, this could help smaller firms compete with bigger insurance companies.
Regardless, Deloitte clearly sees automotive telematics having a huge impact on the insurance industry in 2014. The firm’s report suggests that upcoming UBI applications will “more routinely employ time and location data to issue customized safety alerts, vendor recommendations, and perhaps even loyalty program discounts.”