Usage-Based Insurance: A Pandemic-Driven Confidence Boost

Telematics and the Pandemic

The COVID-19 pandemic has significantly altered many aspects of daily life, including driving habits. Mobility data and analytics firm Arity found that in May 2020, about 50% of drivers were comfortable with having their insurance priced based on the number of miles they drive, where they drive, and what time of day they drive, as well as distracted driving and speeding. This represents a year-over-year increase of more than 12% from May 2019, when only 30-40% of drivers expressed similar comfort levels.

The Role of Telematics

Telematics, which combines GPS with on-board diagnostics to record and map a car's location, condition, and speed, is integral to usage-based insurance (UBI). During the pandemic, Arity data showed significant changes in driving patterns, with a notable drop in driving across the U.S. This data helped insurance carriers offer refunds to their policyholders, a trend widely covered by the media, including Forbes. Private-passenger auto insurers returned around $14 billion in premiums to the nation's drivers, resulting in a five percent reduction in the cost of auto insurance for the typical driver in 2020, as compared to 2019.

Future of Usage-Based Insurance

The pandemic has not only increased comfort levels with UBI but also highlighted its potential benefits. As we move forward, it's likely that more drivers will embrace UBI, especially as they become more aware of the potential savings. For insurers, this means a more accurate pricing model that can better reflect individual driving behaviors. For drivers, it means the potential for significant savings and a more personalized insurance experience.

For readers, the takeaway is clear: consider usage-based insurance as a way to potentially save money and get a more personalized insurance experience. Always compare different insurance options and understand how your driving habits could impact your premiums.