Will Waze start offering Usage Based Insurance?
The traffic app called Waze is perfectly set for Usage Based insurance (UBI). They have the data, skills set, financials, and platform to make it work. As discussed in Good to Great: Why Some Companies Make the Leap and Others Don’t, great companies stay within their hedgehog strategy. UBI might be outside of what Waze thinks it can be the best. The question becomes “Will Waze start offering Usage Based Insurance?”
Engagement
According to a Forbes article, unlike Google Maps, Waze has created a culture of user engagement. Waze generates many of its maps by using GPS to track “the movements of its nearly 50 million users,” according to Bits. A third of Waze users share “information about slowdowns, speed traps and road closures, allowing Waze to update suggested routes in real time [and its] most dedicated fans can also edit the maps directly to improve their accuracy,” writes Bits.
UBI
Usage based insurance is a form of insurance which you are only charged while the vehicle or insured asset is in usage. An example of competitor in this space are Metromile. The idea would be when you turn on your Waze app, you signal that you want your insurance activated.
Waze would also be able to recognize driver safety patterns and habits to appropriately charge those drivers who are reckless or time of day driving. Those who will benefit will be the individuals who are cautious drivers. The Waze app can also serve as a form of telematics reporting to drivers their respective habits, ways to improve, or reporting to parents the driving habits of loved ones. This is similar to software and devices that are used in commercial fleets and could easily have both personal and Commerical uses. This type of UBI could be a way to access cheaper auto liability and property insurance.
Prediction
We suspect Waze will be moving in this direction. Waze was purchased by Google in 2013 for $1.3b. At the time people questioned the value in the purchase, but recently Google has decided to exit the partnership with insurers via its quote aggregation tool compare.com, we recently discussed this topic. Now we suspect Google is going to now compete directly with the insurance industry. Now that it has the pricing data, driver data, user base, and technology they would be well positioned to tackle the insurance industry and act as a major tech disruption.
The data from Waze and Google maps has also provided tremendous amounts of data for Google when they release their autonomous cars. Once the vehicle is autonomous we suspect the need for auto liability will shrink and the risk will transfer to the manufacturer of the vehicle. This strategy pairs well as autonomous vehicle manufacturers have already commented that they would take the auto liability to avoid concerns, change the culture and increase the take up of autonomous vehicles when people are used to controlling their own vehicles.
Financial strength
In regards to financial strength, Google has a market capitalization over $500B and would easily get a A+ Rating from AM Best. This is a change in business model from Google’s current model, however, if the equity holders of Google were uncomfortable with the added risk, Google could easily procure reinsurance to protect earnings volatility.
These are just Insuranceshark speculations about the future of personal and Commercial auto insurance. I cannot confirm whether Waze is going this route but if they are considering it, all I can say is Bravo. They are the best positioned for the change in the industry.
Thoughts
Should Google or Waze need help in this transition I am happy to consult, but the good news for consumers is the future is bright for those with best in class driving habits and low risk.
My recommendation is to use tools like Waze that record your driving behavior, speed, etc. in the event I am wrong in this prediction and Waze doesn’t enter this space, you will still be in a good position to share your data with a future insurer to lower your premiums.
Insurers will be using data from devices and telematics to make decisions moving forward, and without the data insurers may have to err on the cautious side = more expensive for you the consumer. This information will differentiate insurer results and separate the winners from the losers.
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