Advances in Management & Applied Economics, vol. 7, no. 1, 2017, 17-30 ISSN: 1792-7544 (print version), 1792-7552(online) Scienpress Ltd, 2017 A Comparison of Underwriting Decision Making Between Telematics-Enabled UBI and Traditional Auto Insurance Chiang Ku Fan1and Wei-Yuan Wang2Abstract Because of telematics-enabled UBI (usage-based insurance), real driving information can be collected and provided to underwriters. It promises more efficient pricing of risks, with widespread benefits expected to accrue to insurers, consumers and society. From the perspective of auto insurance underwriters, compare to the driving data collected by a traditional auto insurance application form , the underwriting data collected from a telematics devices more effective or not is a question and to answer. By employing prior literature reviewing and grey relational analysis, this study found most of driving behavior data collected from telematics devices is very helpful for auto insurance underwriting, some traditional data collected by an application form is still necessary for underwriters to make a well underwriting decision. The implication is, in order to improve the effective of an underwriting decision making, insurance companies need to take advantage of IoT(Internet of Things) tech to collect more helpful underwriting data as well as adjust their underwriting policy accordingly. JEL classification numbers:O32 Keywords: usage-based insurance, auto insurance, telematics, Underwriting1 Introduction Because of telematics-enabled UBI (usage-based insurance), real driving 1Dept. of Risk Management and Insurance, Shih Chien University,Taiwan. 2Dept. of Business Administration, Shih Chien University, Taiwan. Article Info: Received: October 14, 2016. Revised:November 7, 2016. Published online: January 5, 2017
18Chiang Ku Fan and Wei-Yuan Wang information can be collected and provided to underwriters. It therefore promises more efficient pricing of risks, with widespread benefits expected to accrue to insurers, consumers and society. As the population becomes more accepting of technology and as the generation that has grown up surrounded by technology in its everyday life ages, it is likely that the percentage of policyholders prepared to adopt telematics-enabled UBI will increase dramatically (Karapiperis et al., 2015).Telematics-enabled UBI, otherwise known as telematics-supported or -based UBI, is rapidly becoming a global phenomenon. The auto insurance market is Taiwan’s largest insurance market segment. The premium income of automobile insurance from 2011 to 2015 accounted for approximately 50% of total property and casualty premiums. Automobile insurance claims were usually more than 60% of total property and casualty claims (Marsh & McLennan Companies, 2014). It is said that property and casualty insurance companies have suffered a deficit in their balance of payments with respect to auto insurance. Thus, the auto insurance market in Taiwan is fiercely competitive as insurers strive to attract more profitable, low-risk drivers.