Implementation of UsageBased Insurance solutions : A qualitative analysis of a technology-based insurance model from the perspective of the Swedish insurance industry

Sammanfattning: Recent years’ digital transformation has led to an increased interest in using and utilising smart technology in various insurance solutions, something that has come to challenge the traditional insurance model. The UsageBased Insurance model (UBI) is an example of an insurance model that utilises these technological innovations. With the aid of smart technology, the insurance model has the possibility, by using real-time data, to price premiums more accurately and efficiently, as well as it enables a more proactive approach. Despite the model’s positive capabilities, the degree of implementation in Europe, as well as in Sweden, can generally be regarded as low. Thus, the interest is raised about what influences this low level of implementation, as well as what challenges, requirements and consequences that are attached to such implementation. By investigating the UBI model, the purpose of this study is thus to analyse how new technology-based insurance models could affect the Swedish insurance industry and, in an extension, also the Swedish society. The study also intends to evaluate how these technology-based insurance policies could affect the insurability of risk, this by applying Berliner’s (1982) insurability criteria. With the help of a comprehensive literature study in parallel with a qualitative, semi-structured, interview study, the report aims to provide a broader understanding of what bridging contradictions that exist between theory and practice. The biggest challenges identified, related to a UBI implementation, are the customers’ willingness to share personal data, the insurance company’s propensity for transformation, their digital ability and the Swedish welfare system. Further, it has been concluded that the model’s increased ability to assess risk could consequently mean that an implementation would contribute to discrimination and cherry-picking, also known as cream skimming. To overcome these challenges and risks, and to stimulate a high implementation level, the required factors identified are that the UBI solution needs to stimulate other incentives than the monetary, that it should be simple and designed in a way that makes it feel personalised and an integrated part of the policyholders’ lives. If the primary purpose of utilising the UBI model is to decide the most profitable premium cost, the authors assess that the impediments are too high, the incentives too low and negative consequences too severe to reach a high degree of implementation on the Swedish market. The insurance companies instead have a great opportunity, as a proactive risk manager, to take a whole new position in the policyholders’ lives. Through proactive services, which are not premium-based, insurance companies would instead stimulate a behavioural change by advising, encouraging and in different ways rewarding a behavioural change towards a healthier and safer lifestyle. A development that all actors benefit from, without suffering the risk of punishing and/or discriminating policyholders. From the perspective of lacking social resources, this is also an opportunity to create a more proactive health care in Sweden.