For many individuals and businesses, the COVID situation has had a huge impact on transportation, especially how much we drive. Those in lockdown and businesses with entire teams working from home found a much-reduced need for vehicles.
On the flip-side, those businesses offering or developing delivery services found an exponential increase in hours on the road. This, combined with modern telematics and the recent demand for insurance transparency, has led to the undeniable trend of UBI, or Usage-Based Insurance.
With COVID having impacted so many people's driving patterns, insurance providers can no longer skate by on vast demographic-based generalizations to determine insurance rates. Instead of receiving vehicle insurance based solely on the age, gender, and career prospects of the driver; telematics makes it possible to charge insurance based on the time a vehicle is used and how carefully it is driven during that time.
What is the UBI Approach to Vehicle Insurance
UBI stands for usage-based insurance and is designed to provide a more accurate, responsive, and often lower insurance price to careful or infrequent drivers. It is the data-driven replacement for the old demographic-based insurance rate model.
UBI uses the information collected directly from your vehicle to determine the safety of the vehicle and driver together. How many miles and minutes does a vehicle drive in a week? How sharp are the turns, how hard are the brakes pressed? How often does the vehicle slip on ice or puddles in poor weather?
Responsible drivers and those who drive rarely will see reduced insurance prices under UBI policies while reckless drivers will carry their true fair share of risk assessment.
Why COVID and UBI Go Hand-in-Hand
UBI has been a slow-rising trend in insurance for some time, but many providers are hesitant to offer it for fear of lost revenue. Why has COVID brought the UBI issue to a head? During lockdowns and work-at-home mandates, people realized they were still paying full-price for insurance.
In Nevada, 10 major insurance companies faced charges of excessive premiums during the pandemic. With significantly fewer cars and crashes on the road, premiums should be dropping just as significantly. The fact that they aren't is a sign that it's time for a change.
UBI, usage-based insurance, is the natural solution to this clearly uneven enforcement of risk-based premiums. If risk goes up, OK, premiums go up. But if risk goes down, premiums should go down as well. With a clear and automated UBI system, rates should stay fair based on the real risk being created by drivers and their vehicles.
What UBI Insurance Means for Fleet Managers and Drivers
Right now, most of the talk about UBI policies relates to private vehicle owners and drivers - people who have not been commuting during the pandemic. But what about fleet businesses that have also been impacted by the pandemic?
Deliveries have increased so greatly that many new fleets formed during the pandemic. On-site and in-home services first experienced a drop, then a rise as locked down families took note of at-home needs and adapted to no-contact service methods.
Of course, insurance companies already know that fleets drive a great deal. Where UBI helps fleets is in the quality and care of your drivers. UBI policies are designed to lower the rates for careful and skilled drivers while raising the rates for reckless driving. Teams that put real effort into hiring solid drivers, provide training, and invest in driver safety will also see the benefits of lower insurance rates.
Driver-Specific Telematics and UBI Policies
Finally, some insurance policies for fleets take into account multiple drivers per vehicle and driver-specific policies. By using telematics and driver logins, you can even track the specific safety performance of each driver individually. This can help you show new drivers where they have room for improvement and, in some cases, get appropriately low and personalized UBI insurance for each driver and/or driver-vehicle pair.
Is your team ready for a UBI policy for your fleet vehicle insurance? Not sure how to make the transition? Contact us today for all your fleet management service and resource needs.
