Pandemic spurs demand for usage-based products

The usage-based insurance market is expected to see rapid growth globally in the next few years, driven by the growing number of telematics-equipped vehicles hitting the roads and lower insurance premiums, according to market research platform MarketsandMarkets.

Globally, companies such as San Francisco-based Metromile offer pay-per-mile insurance and a driving app while Slice is growing market share in the US and Canada for a range of payas-you-use short-term insurance products.

The Covid-19 pandemic and associated lockdowns accelerated demand for usagebased insurance. “People don’t want to full premiums for assets that are standing idle, or used infrequently,” says Wynand van Vuuren, client experience partner at King Price Insurance.

In SA, a growing number of insurers are bringing usagebased products to market, basing premiums on the number of kilometres that clients drive per month, the value of their cars and their personal risk profiles.

Discovery Insure’s Vitality Drive programme, launched in 2011, is fundamentally a behaviour-based insurance solution, says Anton Ossip, CEO of Discovery Insure. “Over the years, Vitality Drive has made it possible for Discovery Insure to provide significant benefits to various stakeholders, including clients, the insurer and society.”

The company launched the Dynamic Distance Discount —a cash back benefit rewarding those driving low distances — during the pandemic when clients were not driving much. This was in addition to the fuel cash back benefits payable for good driving on a monthly basis which allows clients to get up to 50% of their fuel costs paid back to them.

By tracking customer driving behaviour, Discovery Insure has managed to gather valuable behavioural insights. While average trip distances have recovered to pre-pandemic levels, the number of trips being made has reduced.

“Our data reveals the most dangerous driving behaviour is speeding,” says Ossip. “Speeding is one of the five key driving behaviours which contributes to 60% of fatal accidents in SA, and account for 78% of all harsh driving behaviours that we measure through our Vitality Drive programme.”

However, its data shows that providing the right incentives — such as fuel cash back benefits or Discovery Miles to individual policy holders or airtime and Mugg & Bean vouchers, for example, to business insurance clients who have fleets — unequivocally improves driving behaviour and loss ratios.

“Gold or Diamond Vitality Drive status-drivers (our best drivers) are 10 times less likely to have points deducted for speeding events than our Blue or Bronze Vitality Drive status-clients, on average,” he says.

Usage-based insurance is even extending to areas like agriculture. King Price, for example, has seen steady growth of its “pay as you farm” agri insurance product, which offers farmers comprehensive cover for their agri vehicles all year round, linked to an annual rebate based on the time the vehicles are actually used.