UBI adoption up as traditional auto premiums rise: J.D. Power

The rising cost of insurance policies is leading more consumers to adopt usage-based insurance as a means of regaining control of their insurance expenses. That’s according to J.D. Power’s recently released 2022 U.S. Auto Insurance Study.

This year’s edition found that consumer satisfaction with the price of their policies dropped to 769 (on a 100-point scale), five points lower than the previous year. But participation in UBI programs has doubled since 2016, with this year bringing in a near-record-high 16% adoption. And despite the negative trends in overall consumer satisfaction, UBI policyholders rated their satisfaction 59 points higher than those carrying traditional auto insurance policies. 

According to Robert Lajdziak, director of insurance intelligence at JD Power, high rates of satisfaction among UBI policyholders boil down to transparency. “UBI consumers are more satisfied even if they are not getting that much of a discount,” he says. “They feel like they have more control over the cost of their premiums compared to customers that own a traditional policy.”

This year, a perfect storm of inflationary pressures– from the soaring cost of used cars and repairs to the unprecedented increase in the number of serious collisions, have put pressure on insurance companies to raise rates.  Using telematics technology to assign risk alleviates much of the sticker shock associated with car insurance premiums, he continues. With access to driver monitoring services, weary and apprehensive auto insurance customers feel like the premiums they pay are accurate reflections of their driving habits and not arbitrary charges. 

However, Lajdziak adds, it’s not just price. He says UBI offers other value to consumers that regular auto insurance policies don’t.

“Customers that aren’t getting additional discounts from UBI are still happier than customers that aren’t participating in the program at all,” he explains. “UBI policies offer teen driver monitoring, vehicle location tracking, and driving analytics which has been a big benefit to consumers right now. Although It’s still a relatively small portion of insurance customers, they’re very happy with that information.” 

Other digital strategies such as online self-service tools have gained widespread appeal among consumers and agents alike, J.D. Power found. This mix of in-person support and online self-service allows customers to take control of their insurance experiences.

“For transactional activities like making a payment or downloading your proof of insurance card, insurance customers are very comfortable doing that online self-service. When they start asking things like, ‘Why did my premium go up?’ They want to speak to somebody live. Having both options makes it more efficient for everyone. They get to do those transactional things online and when they have a question they’re able to go to an agent.”