Exigen Insurance Solutions' Survey Shows Insurers Cautiously Moving Towards Offering Pay-Only-As-You-Drive Insurance

Insurers cite systems technology as biggest barrier and protection of book of business as major driver

San Francisco, Calif., December 11, 2008

Exigen Insurance Solutions, the IT 2.0 provider specializing in rapid implementation of new business initiatives and products for insurance, today reported the results of its Pay-Only-As-You-Drive Survey. Interest in pay-only-as-you-drive (PAYD) insurance has risen sharply in the past year. Low mileage drivers see it as way to save money on their premiums. Public policy advocates see it as a green product that creates incentives for driving less – resulting in less accidents/claims, pollution, oil dependence and public infrastructure cost. In response, some US insurers are moving fast to introduce PAYD products while many are taking a more cautious approach.

Key survey findings show that insurers see protection of existing books of auto business as the major driver and core systems technology as the biggest barrier.

Despite the potential of PAYD insurance to unbalance prevailing auto rating models, little research on PAYD is currently available. Exigen Insurance Solutions conducted several polls during its November 5, 2008 Pay-Only-As-You-Drive Insurance – Coming Ready or Not webinar to find out how U.S. insurers are responding to this interest, their plans for PAYD product introduction, and what they see as the biggest market drivers and barriers.

Exigen Insurance Solutions polled the 163 insurance company representatives from 91 companies that attended the webinar. Some interesting facts emerged:

• 59% of insurance company representatives declared their companies have investigated/considered offering a PAYD product.
• Two insurers indicated they would be offering a product by mid-2009, and twelve stated they had plans to do so before the end of 2009.
• The top market driver for PAYD introduction was readiness to respond to protect their book of business from competitors. Entering a new market to grow revenue was second ahead of entering the market to gain market perception as exercising corporate responsibility with a “green” product.
• 46% of respondents considered the cost of implementing core systems for PAYD products as the major barrier to PAYD introduction. This compared with 20% for consumer privacy concerns, 18% for the cost of telemetry devices, 14% for state insurance regulations, and 4% for existing PAYD patent infringement

“The results indicate that U.S. insurers are adopting a follow-the-leader approach to PAYD that is defensive rather than aggressive. They are clearly monitoring PAYD market developments closely, concerned that if competitors begin to offer a PAYD product they will have to act swiftly to protect their book of business,” said Fazi Zand, VP, marketing and business development for Exigen Insurance Solutions. “The results also reflect Exigen Insurance Solutions’ belief that implementation of agile technology is essential if insurers plan rapid new product introductions, such as PAYD programs. PAYD challenges existing systems to incorporate new rating factors and business processes.”

“As the technology partner for Real Insurance to provide a PAYD product to the Australian market, the survey provided us a way to understand how insurers perceive U.S. market opportunities,”  said Zand.

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About the Exigen Insurance Solutions PAYD Survey
Exigen Insurance Solutions conducted several polls during its November 5, 2008 Pay-Only-As-You-Drive Insurance – Coming Ready or Not webinar ( www.summitwebseminars.com/exigen).  Survey respondents consisted of the 244 webinar attendees, of which 163 were insurance company representatives from 91 individual companies. For the purpose of the PAYD Survey results, only the responses of the insurance company representatives are included.  The webinar featured these presenters: Roger Grobler, Managing Director, Real Insurance, division of Hollard; Karen Pauli, Research Director, Insurance, TowerGroup; and Fazi Zand, VP, Marketing and Business Development, Exigen Insurance Solutions. 

Download the complete survey results, here