The popularity of usage-based auto insurance programs is growing every year, and millennials are leading the charge.
Millennials are more versed in technology than any previous generation. That may explain why usage-based auto insurance programs (UBI) are so popular among 18 to 34 year olds. These programs, which rely on real-time data to analyze driving habits, provide highly personalized insurance pricing and have helped insurers better meet the demands of Generation Y.
When asked what makes their generation unique, millennials ranked “Technology Use” above all other categories, according to Nielsen. Meanwhile, more than 74% reported that technology made their lives easier. Needless to say, Generation Y has a more positive outlook on technology than any other in history.
Therefore, it should come as no surprise that millennials are overwhelmingly in favor of new usage-based insurance programs that use telematics to generate custom pricing plans based on monitored driving habits.
Underscoring their favorable view of technology, a Towers Watson consumer survey found that 72% of millennials consider usage-based insurance policies more accurate at calculating premium costs than the traditional pricing model based on gender, age, and credit score. Moreover, 88% of millennials responded that they were interested in taking out a UBI policy.
Privacy Concerns (or Lack Thereof)
Although usage-based insurance is popular among younger drivers, older drivers are more hesitant to sign on, primarily citing privacy concerns.
According to the National Association of Insurance Commissioners (NAIC), the older someone is, the less likely they’ll be comfortable with the idea of insurers tracking your driving behavior, as ia reports: Baby Boomers are the most protective of their privacy, followed by Gen Xers.
Laura Sherman, founding partner of Baldwyn Krystyn Sherman Partners says of older generations, “[They] aren’t early adopters [of telematics] like millennials, so they haven’t been as accustomed. I think you’ll find that they’ll be a lot more hesitant to share all that information.”
Conversely, these concerns haven’t had a demonstrable effect on millennials: “[They] grew up with their world being very public. They will probably be a lot more adoptive.” Sherman’s assertion makes sense: for the most part, millennials are largely unmoved by digital privacy fears.
Having grown up in the age of cell phones, social media, and the internet at large, it’s no surprise that only 20% of millennials are worried about digital privacy, according to the American Press Institute.
In the United States alone, five million drivers are currently signed up for a UBI policy. Globally, those numbers are projected to continue growing. According to IHS Automotive, 142 million drivers will sign up for a usage-based auto insurance policy by 2023.
As usage-based insurance becomes more widespread, drivers have begun to shift their behavior to accommodate it. The Insurance Research Council public opinion survey found that 56% of respondents reported changing their driving behavior since installing a telematics device. Millennials are more likely than other age groups to let UBI shape their driving behavior.
According to Towers Watson, of those respondents willing to take out a UBI policy, 84% of Millennials said they would change their driving behavior if it correlated to a lower premium, versus 53% of other age groups.
As usage-based insurance becomes more common, consumers will have more financial incentive to drive safely. As a result, this technology could have a widespread positive effect, encouraging better drivers and therefore, safer roads.
(Image credit: Ed Gregory/stockpic)