Agent’s Usage-Based Car Insurance Guide: Common Questions And Myths—Busted!

a woman checking the rear view mirror in her car

Highlights:

  • Today’s drivers are benefitting from auto policies tailored to personal driving habits
  • Many want to know more about how usage-based insurance works
  • Some common misconceptions, or myths, are easily busted

The days of the “one-policy-fits-all” approach to auto insurance are ending as consumer seek coverage tailored to their personal driving habits. For many consumers, usage-based insurance is a new concept – and with anything that’s new, they might not understand the benefits or how this technology may fit into their lives. Consumers are looking to their agents to best understand if usage-based insurance is right for them.

How selling usage-based insurance benefits agents

Talking to your clients about usage-based insurance can strengthen retention and help them save money now. Customers who participated in the SmartRide® program had first term retention rates over 5 percentage points higher than the Nationwide average. Even though some customers might require a rewrite, usage-based insurance provides discounts based on driving patterns and behaviors. Nationwide launched its telematics offerings almost nearly a decade ago, providing years of experience in the usage-based insurance space.

Here are common questions, as well as usage-based insurance myths that are easily busted for selling usage-based insurance plans (a.k.a. telematics) to your customers.

Q: What is usage-based insurance?

A: Usage-based insurance collects information about a person’s driving habits to provide coverage based on how they drive. Some usage-based insurance options are based on how safe you drive (SmartRide®), others on the number of miles you drive (SmartMiles®). A recent survey by JD Power survey1 found consumers expect their average miles driven to remain low and say they are more willing to consider usage-based insurance due to COVID-19.

Q: How is data collected?

A: After the insured enrolls in a usage-based insurance plan, data is captured using a mobile phone application or a small plug-in device installed in the vehicle. In the future, drivers of a newer car models could enable their vehicle’s built-in technology to transmit data for a more seamless customer experience. Common data types collected include miles driven, hard braking, fast acceleration and nighttime driving—depending on the usage-based plan.

Q: How do the discounts work/how much can someone save?

A: Safe drivers can save up to 40% in Nationwide’s SmartRide® program, and are be eligible to earn an instant 10% discount when signing up2. The SmartMiles® pay per mile program is saving lower-mileage drivers on average 25% over a traditional Nationwide policy, and they can also earn up to a 10% discount for safe driving3.

Myth #1: Customers can’t trust an insurance company with this data.

Busted: The data collected by Nationwide is used for insurance purposes and never sold to any third-parties. Drivers can easily see their driving data that is gathered through the app or online web portal. Insurance companies are using data in usage-based insurance as a vital part of providing safe driving feedback. Nationwide takes members data security very seriously and uses security measures to protect their privacy.

Myth #2: My driving data will be used to increase my rates

Busted: The point is to help people learn to be safer drivers, not penalize them for unsafe driving. Nationwide won’t increase your rates for participating in our SmartRide program. Every participant receives a 10% initial discount for the first term, while their driving is evaluated. Any discounts earned will be maintained for the life of the policy. If they don’t qualify for additional discounts because of unsafe driving habits—they just wouldn’t get a SmartRide discount at renewal.

Myth #3: The process to enroll and activate a usage-based insurance plan is too complex.

Busted: Even though some customers will require a rewrite, it is a great time for agents to proactively reach out to help their clients understand the benefits. The customer experience for these programs is actually very easy and the discounts they earn are automatically applied—and can be significant. There are options to enroll with a mobile app or plugging in a small device in the vehicle. It only takes a few minutes to install the device and most people can easily do it themselves without any specialized skills or tools. Watch how to install the device.

1 J.D. Power Insurance Intelligence, Insurance During COVID-19, Consumer attitudes and perceptions

2 SmartRide program availability varies; program criteria differ in California. Stated discounts are approximations. Discounts do not apply to all coverage elements; actual savings vary by state, coverage selections, rating factors and policy changes. The enrollment discount applies during data collection; the final discount is calculated according to driving behavior and could be zero. The final discount applies at the next policy renewal and is subject to change based on actuarial support at subsequent renewals or with changes in drivers or vehicles on the policy.

3 SmartMiles savings based on national data through February 2020. Program availability varies. SmartMiles includes a base premium plus a variable premium based on the coverages in force and the days and miles driven.