September 11, 2023

How usage-based insurance APIs are reshaping the auto insurance experience

Winona Rajamohan

Content Marketing Manager

In 2022, participation in usage-based insurance (UBI) programs doubled from what it was in 2016. Insurance price satisfaction among UBI customers was 59 points higher than overall auto insurance customers, where customer satisfaction levels have dropped to a 20-year low. The consumer shift toward UBI makes these programs even more valuable for insurance providers — and with usage-based insurance APIs, building quality apps that deliver convenience to drivers just got a whole lot easier.

Whether you’re in the business of insurance technology (InsurTech) or an incumbent auto insurance provider, the benefits are clear. Usage-based insurance products mark a new era in the relationship between auto insurance providers and policyholders.

Personalized premiums, cost savings, and incentives all lead to more loyal customers for insurance companies. But more importantly, it reimagines the customer experience and allows auto insurance to be as seamless and intuitive as all the other digital products we use.

The biggest bottleneck to this customer experience is data. It may not be surprising that most young drivers would rather not share their data with their auto insurance providers because they’re unsure how organizations use it. In fact, a survey by Zebra found that 40% of Gen Z drivers don’t know what telematics is at all.

The key to UBI success is building mutual trust with policyholders via accurate, secure, and transparent vehicle data. If you’re looking for a scalable way to reach this goal but not at the expense of your existing software development priorities, this blog is for you.

Why use APIs for usage-based insurance?

A 2022 survey by TransUnion discovered that almost half of the drivers surveyed opted into a telematics option provided by their insurers, with two-thirds reporting that they were satisfied with their choice.

A sophisticated and reliable UBI product needs mature technology. Insurance companies need to manage vehicle integrations and claims from drivers, all while keeping customers engaged and satisfied. But doing everything at once isn’t easy — especially if your specialty is building insurance products and not vehicle integrations.

A standardized car API makes it easier for insurance providers to do what they do best without compromising the quality of a software-driven experience. You can grow your business with:  

Software-only vehicle integrations ☁️

Vehicle telematics allows insurance providers to automatically retrieve the right vehicle data points without policyholders installing aftermarket hardware or conducting manual data entry. Although these forms of data collection have long been prevalent in the auto industry, they’re not cut out to meet what consumers expect today — with nearly half of those surveyed by Solera wanting fully digitized processes for processes like settling their collision claims.

If insurers have mobile apps or a web portal they can use a connected car API to collect mileage data directly from a vehicle without customer intervention. This data collection method is integrated into the app’s architecture, removing the risk of delays and inaccuracies from disjointed data sources.

From a cost perspective, UBI providers use Smartcar’s API to save money and time recording mileage data on a per-use basis across 30+ vehicle brands. We can authenticate vehicles with a quick consent-based onboarding process that happens directly in mobile apps and web portals, or through a link sent in an email or text to vehicle owners.

Higher user engagement on mobile insurance apps 🤩

Digitizing auto insurance doesn’t come easy. The average cost of developing a car insurance app in the US and Europe ranges from $60,000 to $180,000 — not accounting for the hidden costs often associated with in-house development, like upsizing engineering times or making up for constrained bandwidths.

These investments make it even more important for auto insurers to maximize app usage and turn it into an avenue for more customer engagement and adoption. Beyond accessing policy information, filing claims, and paying bills, insurance providers can use a standardized car API to equip their apps with user-centric capabilities like:

  • Faster claim validation: Retrieve data at regular intervals to reduce the time needed to verify information from a policyholder’s vehicle.
  • Predictive maintenance: Help vehicle owners reduce claim costs and mitigate risks by using your insurance app to set up personalized, predictive maintenance alerts that notify customers when they need to check their vehicle’s tires, engine health, braking systems, and more.
  • Incident notifications: Send an immediate alert when an accident involves the policyholder’s vehicle.
  • Roadside assistance: Use a vehicle’s approximate location to dispatch help immediately after an incident. Vehicle diagnostic data can also help dispatchers identify the right servicing equipment to bring to the incident location.
  • On-demand vehicle information: Supplement your app with general vehicle diagnostic data that policyholders would be interested in monitoring regularly, giving them a reason to log into your app even when no incidents occur.

Access to accurate and secure data 🔐

According to a survey by JD Power, nearly one-third of auto insurance customers in the US saw a rate increase in the past year. These hiked prices make UBI products more enticing but also introduce new concerns. Only 38% of customers said that the information collected by UBI technologies was consistently accurate.

Drivers want their insurance to be priced fairly without putting their sensitive information at risk, giving insurance providers a big responsibility to provide technology to manage these expectations. With Smartcar’s APIs, insurance providers don’t have to rely on data collected from:

  • Hardware installed in the vehicle’s OBD port: The auto industry has steadily been moving away from this technology. If not installed correctly, these devices can record inaccurate data, making it inconvenient for customers to get proper rates. More importantly, these OBD devices are black boxes of information that give drivers limited visibility into the data auto insurers collect.
  • Smartphone telematics: Auto insurance providers often use smartphone apps to capture driver behavior. But smartphone data collection is only reliable if the phones are positioned correctly and have high-quality sensors that can capture the right information. From a privacy standpoint, smartphone telematics collects real-time data not limited by short-term authentication like token-based APIs — which gives drivers more to worry about with constantly being monitored or having unrelated sensitive data shared with insurers as well.

Compatibility with EVs entering the market 📈

As EV adoption grows, auto insurers will rethink how they price insurance premiums and explore new opportunities. A LinkedIn article by InsurTech strategist Adam Kostecki, explains how EVs “completely change the nature of the risk in ways that actuaries do not fully understand.” Factors like more driver assistance features, expensive parts, and features that have never existed before contribute to this shift.

Coupled with the fact that new EV models are rapidly being introduced to the market, auto insurers must have the means to manage and standardize all their EV data.

Electric vehicles produce a lot more data than regular gas-powered vehicles. Smartcar helps auto insurers offload the hassle of building software-only integrations for EVs and standardizing data across different makes and models. Our main job is building vehicle integrations — which means we have the resources to keep up with the EV market and ensure the reliability of each integration.

With our API, auto insurers can access data like mileage, battery levels, and location across over 100 EV models and counting, with new makes and models automatically made available to customers when ready.

When we were looking for a user-friendly and cost-effective way to verify a policyholder’s mileage, Smartcar’s solution really stood out. Having access to an API that directly integrates with each vehicle is a huge advantage for us. On top of that, Smartcar’s docs and SDKs made it easy for our engineers to implement.

– Andreas Broström, CEO at Paydrive

Solving implementation challenges with Smartcar's APIs for usage-based insurance

Insurance is part of the ‘switching economy,’ in which buyers are open to moving to a new provider if they find better rates or products. With emerging InsurTechs, incumbent insurance providers, and even OEMs exploring UBI products,  drivers have no shortage of choices. Beyond premium prices, consumers can now quickly evaluate a provider’s user experience as a reason to switch or stay.

Smartcar’s connected car API helps insurance providers stay competitive by optimizing their insurance app experience and addressing the following challenges:

Meeting driver privacy standards

A big qualm consumers have with UBI is that auto insurers have unrestricted access to sensitive mobility data without their consent. With connected car APIs, insurance providers have a clear way to implement robust enterprise-grade security compliance protocols. When you integrate with Smartcar’s API, you’re also implementing the following data security measures:

  • A consent-based permissions system compliant with OAuth2 authorization protocol: With Smartcar Connect, Drivers can view the exact data points requested by your app and provide explicit consent before onboarding their vehicle.
  • API tokens management: Instead of building token management systems from scratch, Smartcar lets you work with pre-built UI, databases, token routes, and refresh routes.
  • HTTPS data encryption: All data transferred between Smartcar and our clients is protected with industry-standard Advanced Encryption Standard (AES) 256-bit encryption.
  • GPDR and CCPA compliance: As an API vendor facilitating data-sharing between drivers and apps, we’ve prioritized building a secure platform compliant with digital privacy laws — giving you one less thing to worry about.

Vehicle data collection and standardization

Building vehicle API integrations from scratch with internal developer resources is a big undertaking. The inability to commit to these investments easily pushes companies to opt for more traditional methods like purchasing data and using hardware devices.

But direct software-based integrations with vehicles are the most reliable, accurate, and secure way to collect mobility data from vehicle owners. The need for risk-free data streams is why insurance providers use Smartcar’s API to simplify the app development experience while delivering a future-ready product for widespread vehicle connectivity and stricter mobility data protocols.

Smartcar empowers your developers with the tools and resources they need to implement a network of connected car integrations with standardized data, user login flows, and user interfaces during onboarding.

What it looks like building vehicle apps without a standardized car API

Instead of bogging engineers down with fragmented vehicle connections and limited vehicle support, UBI apps can use Smartcar to deliver services to hundreds of millions of vehicles — including 95% of EVs on the road today.

Customer onboarding and adoption

Consumers hold digital products to the same standard, regardless of what purpose they serve. If you’re used to user-friendly interfaces and an intuitive signup process for banking, shopping, and entertainment apps, why would you not expect the same from your insurance app too?

Smartcar designed our vehicle onboarding process to help apps deliver a quick, modern, standardized login experience across all compatible brands. You can use our comprehensive integration guides and SDKs to set up your app with Smartcar Connect, an OAuth2.0 onboarding flow that allows customers to onboard their vehicles to your UBI program in a few clicks.

All your customers need to do is:

  1. Log in to their connected services account
  2. Review the data your app is requesting
  3. Consent to sharing their data with your app

Is Smartcar's usage-based insurance API the right choice for your app?

A car API will prove helpful if you want to build a mobility app that checks the following boxes:

  • Integrates with EVs and connected cars without any hardware: Zeti’s pay-per-mile fleet financing platform moved away from hardware because it drained vehicle batteries and introduced unnecessary costs. With Smartcar, they experienced fewer vehicle disconnections, higher bill accuracy, and more revenue.
  • Gives customers the choice of consenting to shared data: Pay–per–mile insurance app Paydrive ensures that customers are charged fairly by periodically collecting mileage and location data. Customers are more likely to agree to use the app because of the clear verbiage and UI informing drivers about the data an app collects from them. This UI is pre-built and ready to use via Smartcar.
  • Moves quickly to stay competitive: Battery analytics software, Recurrent sped up production by 6 to 12 months by retrieving data with Smartcar’s car API platform. This speed to market was vital for them as a pre-seed startup in the EV battery software space.

To get started with our car API for auto insurance, check out our auto insurance guide or talk to our team today!

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