APIs for Usage-based Insurance (UBI)
In recent years we have experienced a significant transformation in the way people and companies interact with goods and services, showing a general trend that has led us from the consumption of products to the consumption of services. Probably the three clearest examples that come to mind when we think of this transformation are carshare services versus buying our own car, streaming music versus buying physical discs, or cloud computing services instead of maintaining our own servers.
A similar trend is also taking place in the Insurance Sector, moving away from the traditional insurance model, where consumers purchase specific insurance products, towards a service consumption model in insurance that emphasises flexibility and customised solutions, where insurers offer personalised services tailored to individual needs based on the data they can obtain from their customers.
Insurers provide services through digital platforms that enable real-time interactions and data exchange. A model where services focus on preventing losses rather than simply compensating for them by shifting the focus from static products to dynamic and personalised services that adapt to policyholders’ needs and behaviours.
In this context, Usage Based Insurance (UBI) has emerged, where insurers track driving behaviour (speed, braking, mileage) via telematics devices or smartphone apps and premiums are adjusted based on actual driving habits, promoting safer behaviour.
The implementation of usage-based insurances entails a series of advantages:
- Premiums are adapted to individual behaviour. Rather than a fixed annual premium, UBI adjusts the rates depending on actual use patterns. This approach ensures safe drivers pay less. It promotes equity and responsible driving.
- It relies on telematic devices or smartphone applications to collect driving behaviour data. These devices record factors such as speed, acceleration, braking and mileage which insurers analyse to assess risk accurately. Safer driving habits lead to lower premiums, encouraging policyholders to drive responsibly.
- Policyholders appreciate the transparency and control UBI offers. They can monitor their driving habits and adjust their behaviour to save on premiums.
- It moves from “detect and repair” to “predict and prevent” in line with the industry’s evolution from a reactive to a proactive model. With AI and deep learning techniques, insurers can predict risks, prevent accidents and optimise customer experiences.
But beyond the advantages, it also poses a series of challenges not only in terms of financial feasibility or adjustments to the tax system, but also in terms of technology, and APIs are a fundamental way to meet these technological challenges.
APIs play a crucial role in enabling and improving usage-based insurances, since they facilitate data integration, communication and exchange between systems and platforms. Let us see how APIs can help implement UBI:
🗒️ Data collection and integration. Data collected from sensors, GPS and vehicle diagnostics form the basis of UBI, APIs allow insurers to access this data seamlessly. Instead of relying on manual data entry or aftermarket hardware, the APIs allow for software-only vehicle integration. This ensures accurate, real-time data retrieval without any inconveniences for policyholders.
⚠️ Personalisation and risk assessment. APIs facilitate the exchange of driving behaviour data between insurers and policyholders. By analysing this data, insurers can adapt premiums based on individual driving habits. Risk assessment becomes more accurate, leading to personalised pricing and fairer premiums.
❤️ Customer commitment and satisfaction. UBI APIs improve customer experience. Insurers can interact with their policyholders via digital channels and provide them with information on their driving pattens. Not only do real-time comments, rewards and personalised recommendations increase customer satisfaction, but also promote safer driving behaviour.
💻 Efficient claims processing. APIs streamline claims handling because when an accident occurs, insurers can quickly retrieve data to assess fault and process claims. This reduces paperwork and speeds up claims settlement.
✅ Scalability and futureproofing. As UBI adoption grows, APIs allow insurers to scale their offerings without compromising existing software development priorities. By leveraging standardised automotive APIs, insurers can focus on their core competencies while ensuring a high-quality digital experience for policyholders.
Thus, the use of APIs allows insurers to create robust UBI products, optimise developers’ efforts and create a seamless motor insurance experience.
For further information, do not hesitate to contact us to talk with our experts.
