What Makes Usage-Based Insurance Possible?

What Makes Usage-Based Insurance Possible?

James Couzens

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It’s 2022 and Australia still doesn’t have true usage-based personal motor insurance, at least from what I could find when looking to insure my own vehicle. I live in the inner city, drive infrequently, and believe I’m a good driver, so I’d benefit from a telematics-based insurance product. While there are many “pay-as-you-drive” products, very few look at your actual driving, instead relying on manually updated odometer readings to make premium adjustments.

Of the three insurers I found that used telematics, one stopped selling the product a few years ago, another recently went out of business, and the third has very poor reviews. So there’s not really much of a choice. Nevertheless, it did get me thinking about what it might take to implement a successful usage-based insurance (UBI) product.

What does UBI mean? American Family, a Guidewire customer, describes its UBI product as follows:

“UBI means ‘pay-how-you-drive.’ It’s a way for auto insurance companies to set your premium based on how safe your driving habits are.”

As American Family explains, “it puts you in control.” The telematics app helps you understand your driving behaviour, which translates to better driving and better premiums. This is backed up with Australian data for commercial motor (where UBI is more common), which found that, for a fleet user, telematics reduced speeding by 50% and at-fault claims by 66%. Also, in a New South Wales trial of young driver behaviour, telematics resulted in significantly improved driving over the monitored period.

When it comes to devices, Transport Certification Australia (TCA) provides the National Telematics Framework (NTF) to certify telematics providers. Certification is at three levels:

  • Level 1 – Self-certification; appropriate for situations where high levels of data accuracy or integrity are not required

  • Level 2 – Requires TCA certification; used for applications where accuracy, integrity, authenticity, and risk mitigation need to be actionable

  • Level 3 – Certified for situations where data needs to have high integrity so that it can be used for regulatory evidence

Currently there is no requirement for telematics used in insurance to be certified to NTF levels. But I believe it makes sense for telematics to be considered at least Level 2 given the actionable use of the data.

Apart from the device itself, what else do you need for successful UBI?

  • A personal motor insurance product

  • Integration with telematics providers

  • Use of telematics data for rating

The recent release of GO Australian Personal Motor on the Guidewire Marketplace provides the basis for an Australian UBI product. This can be combined with integration to a telematics provider such as Cambridge Mobile Telematics (CMT), which provides a Ready for Guidewire that can be the starting point for the required integration. CMT already has insurance customers in Australia, including some in the Guidewire customer community.

The last part of the puzzle comes in the form of SurePath Content Usage-Based Insurance Trip Pricing for PolicyCenter, which enables information to be captured from an integrated telematics provider, adds trip-pricing modules, and automatically executes trip pricing on a periodic basis with charges sent to billing. This SurePath content provides the needed reference implementation for adding telematics data to a personal motor product.


So all the pieces are there to create a UBI product in Australia. With the changes in driving habits due to COVID, evolving attitudes about the sharing of driving data, and the great innovators we have in Australian insurance, I'm sure my UBI options will have broadened by the time of my next renewal!