Pay-per-mile policies are much more popular with the younger demographic
Usage-based insurance (UBI) continues to attract funding despite the fall in insurtech investment due to Covid-19.
This is according to data and analytics company GlobalData. Its 2019 UK Insurance Consumer Survey found that 9.7% of drivers currently have a UBI policy, but this figure is expected to increase as a result of Covid-19.
Due to social distancing and the government lockdown, car owners have been driving much less, which has brough these products to the fore.
UBI operates on a model whereby policyholders’ premiums are calculated depending on the number of miles they drive.
Yasha Kuruvilla, insurance analyst at GlobalData, said: “Given that mileage is a key factor when calculating motor premiums there have been calls for premium refunds, yet only a handful of insurers have offered any. As a result, UBI policies will become more popular because of Covid-19.”
UBI policies are at present much more popular among younger drivers with 22.3% of drivers between the ages of 25 and 29 having purchased a UBI policy in 2019.
Meanwhile uptake among those aged 50–54 was just 2.2%.
GlobalData cited that younger people are more likely to be adversely affected by the Covid-19 pandemic due to a lack of savings and the large representation of this demographic in the hospitality sector.
The firm believes that a result of Covid-19, customers will appreciate UBI’s value proposition more, as they will feel unfairly treated by paying for an annual policy if they are using their vehicle less.
The increased attractiveness of these types of policies is reflected in continued investment during this financially difficult period.
Pay-per-mile policy provider By Miles recently reported its strongest week ever in April 2020, highlighting interest in UBI propositions even during a period of financial hardship.
Meanwhile, pay-per-mile motor insurer Just Auto Insurance launched in the US during the Covid-19 pandemic.
Kuruvilla added: “With interest in UBI policies remaining high despite economic downturn, more policies of this nature will continue to be developed. While these policies are mostly focused on motor insurance, more lines of business will begin to experiment with the model as well.”
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