The coronavirus pandemic kept many vehicles off the roads over the past two years. With high unemployment and remote work, Americans drove much less, with highway miles traveled during March 2020 regressing to 1985 levels, according to the Federal Highway Administration.

As a consequence, auto insurers paid $18 billion in customer rebates in 2020 to recognize the low miles driven, noted J.D. Power's 2021 U.S. auto insurance study. Low mileage yielded higher willingness among consumers to try usage-based insurance (UBI) with 1 in 3 of auto insurance customers willing to try UBI, according to the J.D. Power study. And that's on top of 16% of auto insurance customers already using telematics-based insurance which is “double the volume seen just five years ago and … the largest year-over-year increase to date," according to the study.

UBI has a growing foothold in personal auto insurance with many insurers offering UBI programs, such as mileage-based “pay as you drive" and behavioral-based programs such as “pay how you drive."

UBI is much more popular among younger auto insurance consumers, with an adoption rate of 17% for Generation Z and 16% for millennials compared to less than 8% of Generation X, baby boomer and senior drivers, according to a 2021 survey from Standard & Poor's Global Market Intelligence. 

However, agents might find baby boomers and Generation X to be more open to UBI than before the pandemic.

Boomers, for instance, may now be less concerned about digital tracking. And consumers across all age groups are more comfortable with tech, having used it during the pandemic for transactions ranging from ordering groceries to tracking vaccinations, so it's natural that some consumers now have less resistance to using tech for insurance.

A key attraction of UBI is pricing. Most programs offer an initial participation discount—plus many new users of UBI stand to save premiums if their mileage and driving habits are favorable.

But programs are moving beyond price to value. That means that, along with price savings, consumers can reap protection, safety, and peace of mind from UBI.

One example of value for customers: UBI mobile phone apps can provide first notice of loss (FNOL). In the event of an accident, the app can trigger an automatic response. Another example includes enabling parents of young drivers to see how those drivers are behaving on the road and where they are driving. This can open up conversations about safe driving, phone handling, and distracted driving and can offer peace of mind for parents.

Agents should consider these three approaches when offering UBI to clients:

1) Participation discount. Policies offer a discount for drivers to take up a UBI policy.

2) Continuous monitoring. The UBI program is always running and all activity is monitored throughout the policy term. This contrasts with programs that track driving for a period of time, determine a price and stop monitoring. With a continuous monitoring policy, premium benefits typically come at the end of the policy term.

3) Rewards. Rewards policies pay points during the term for good driving behaviors, with points redeemed for gift cards. This is enabled by continuous monitoring, which can find driver behavior improvements, enable young driver and distracted driving monitoring, and provide crash detection and FNOL.

Some carriers combine participation discounts, continuous monitoring and rewards in their UBI offerings. These varied approaches can appeal to different demographic groups, giving agents options to present.

Agents should also be aware of the three main consumer objections to UBI: privacy; dislike for being penalized for poor driving habits; and delay in earning a premium discount. Today, concerns about privacy, while still significant, is lessening as an objection. Agents can educate consumers that some UBI programs do not surcharge for bad driving and also can help steer consumers toward programs that offer rewards.

Casey Burke is marketing strategy manager and Steve Butler is personal lines product management and underwriting practices leader for Westfield, a super-regional insurance carrier based in Westfield Center, Ohio.