A “worryingly” large number of UK drivers are taking on huge financial liabilities in exchange for tiny annual savings on their motor insurance, suggesting that many are confused over which policy is best for them, research revealed last week.
Around 39% of motorists – equating to around 16 million drivers – are voluntarily opting for an excess above £250 on their car insurance policy in the belief that they will pay a lower premium, a study from uSwitch.com found.
The price comparison and switching service urged motorists to “think seriously” about the level of financial risk they want to take on before committing to a policy, revealing that the average saving for drivers taking on higher excesses is just £1.
But in a price competitive market, could newer models of motor insurance be the solution for both consumers’ wallets, and insurers’ books?
“There are options for consumers which can provide total clarity, such as telematics and usage-based insurance (UBI), which offer consumers a tailored policy based on their unique driving behaviour,” Jonathan Hewett, group CMO at Octo Telematics, told Insurance Business.
“Telematics insurance and the analytics that it provides means that there will be less confusion of what customers are buying, and total transparency over pricing and how discounts are generated,” he said.
As well as being potentially beneficial for consumers, such systems can help insurers to build stronger relationships with their policyholders – which could help them with retention.
“Customers who opt to use telematics not only benefit from an initial reduced cost, but the satisfaction of knowing their premium is based on their personalised data, not averages from thousands of other drivers,” Hewett said.
“This builds long term loyalty between the insurer and the customer, as well as encouraging safer everyday driving.”
There are also increased opportunities for insurers to partner with auto manufacturers as cars become smarter – which could increase the adoption of UBI and telematics policies, according to a recent report.
“Automakers and insurers are in a rare relationship in which they share virtually all of their customers – all auto owners (except those who are uninsured) have auto insurance, and all auto insurance policyholders’ own vehicles,” David Lukens, director of telematics at LexisNexis told Insurance Business last month.
“By sharing information about these shared customers, insurers and automakers can enhance their relationships with the customer and drive a better overall car ownership experience.”
UBI creates chance for insurers to work with automakers
Revealed: UK drivers taking massive risks for tiny insurance savings