Pricing sophistication - auto insurance telematics

Is there anyone significantly outperforming the competition due to their use of Insurtech? Yes!
Prograssive's telematics-based pricing sophistication

1. 1
UBI is not about discounted policies
It is about pricing sophistication
Progressive has mastered this capabilityProgressive’s UBI tariff
Source: S&P Capital IQ dataSource: Progressive
0%
5%
10%
15%
20%
25%
30%
35%
40%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Progressive MKT- excluded progressive∆% (right axes)
Ult L&A Ratio -Private Passenger Liability
PERSONAL
AUTO
Even utilized an
existing driving
score at the
point of sale
Telematics-based pricing allows to target the same x% profitability, but with a more competitive price for the
better risks (higher ability to attract and retainthem), and an adequate price for the riskier profiles(if they stay)

2. 2
Personal auto
Up-front selection self-selection Pricing sophistication
Market
Non-Telematics portfolio
From …
Pricing Losses
Profits
Risk distribution within a pricing cluster
… to
Driving
score
Indicated
factor
Company selected
discount/surcharge
1-20 1.796 [x]
21-40 1.233 [x]
41-60 0.744 [x]
61-80 0.668 [x]
81-100 0.559 [x]
Risk level compared with their pricing cluster
Low risk driver Average risk driver High risk driver
Actuarial evidences robust enough to be integrated in the risk
model, in order toachieve a more accurate risk pricing
Policy
purchase
First
renewal
Second
renewal
Traditional
pricing
The product sold to the client
Source:IoT Insurance Observatory
Telematics portfolio
$$$$
Policyholders refusing
the telematics offer
Policyholders accepting
the telematics offer
PERSONAL
AUTO

3. 3
IoT is a killer application for the insurance sector
Source: IoT Insurance Observatory
Insurer’s IoT-based smarter action are a social good
An integrated holistic adoption of the IoT paradigm allows to
profitably manage the insurance portfolio whileincreasingavailability and affordability of insurance coverages
Expected losses can be reduced structured programs with both real-time mitigation actions
tosolve a specific situation, and behavioral change mechanisms to promote safer behavior
Better match rate and risks with IoT data
Smaller and more accurate pricing clusters allow a large part of profiles to receive a lower
rate
Even with the ability to price the individual probability of loss (cluster of one) the insurance
foundation isn’t canceled:
•The risk of each policy will contribute totheexpected losses of the portfolio
•The premiums paid by many lucky policyholders will be used to pay the claims ofthe few
unlucky policyholders who had anaccident in a period of coverage
IoT data increases effectiveness and efficiency of the claim process, so improving the
combined ratio
A large part of
the
policyholders
will pay less
(and portfolios
currently difficult
to insure will
become more
insurable )

4. 4
The IoT Insurance Observatory
Insurance IoT Observatoryis aneight-year-old think tank
specialized in theinsurance IoT with the participation oftop
executives from the most relevant Insurers, Reinsurers, and Tech
players in the IoT insurance arena
The Observatory is about connecting people and ideas in order
tospread the innovation culturethroughout the insurance
market with three concrete outcomes:
•A global multiclient research on the insurance IoT paradigm
•One-to-one workshops to each member
•Plenary symposiums with all the members
Some figures about our seven editions:
•3305 hoursof one-to-one workshops over the five annual
editions of the Observatory
•38plenary symposiums between North America and Europe
•9international publications
All these contents come from the discussions at IoT Insurance Observatory,
a think tank promoting a profitable IoT adoption in the insurance sector
If you are interested in joining, feel free to reach me out
at [email protected] 2024
Observatory
members