1. Usage Based Insurance: Perr&Knight Internal Presentation Presented by, Michael J. Covert, FCAS, MAAA

2. Usage Based Insurance Update 2 Usage Based Insurance (“UBI”) is… A rating structure based on data, from a device installed in a motor vehicle, in which an individual’s driving habits are used to determine premium. Defined as Telematics Pay as you drive Also Known As Allows for rating on actual driver behavior rather than proxy data. Revolutionary

3. Usage Based Insurance Update 3 Presentation Outline/Scope History of UBI Value Added Services Telematics Ecosystem Devices Competitor Monitoring Rating Plan Design Regulatory/Rate Filing Support State Regulations Part I – Basics of Usage Based Insurance Part II – Development and Support for Rate/Rule Filings Part III – Perr&Knight History and Next Steps Important UBI Filings Current Environment and Future Historical BillingsQuestions?

4. Usage Based Insurance Update 4 Part I - History of UBI OBDII/PPD 1996 1998 Progressive pilots Autograph Progressive launches Tripsense; GMAC launches OnStar Low Mileage Discount 2004 2008 - 2011 10+ insurer groups introduce UBI rating on Personal Auto products

5. Usage Based Insurance Update 5 Part I - The Added Value of UBI Value Added Service Benefits Insured Benefits Insurer Driving FeedbackXX Vehicle TrackingXX Roadside AssistanceXX Geo-fencingXX Vehicle DiagnosticsXX Claim ValidationX Improved MarketabilityX Improved PersistencyX

6. Usage Based Insurance Update 6 Part I - Telematics Ecosystem

7. Usage Based Insurance Update 7 Part I - Device Selection Original Equipment Manufacturer (“OEM”) Solution Hard Wired Device OBDII Plug In Device Mobile Device

8. Usage Based Insurance Update 8 Part I - Device Selection OBDII Plug In Device Multiple Vendor OfferingsDevice Costs DroppingRapidly Changing Technology

9. Usage Based Insurance Update 9 Part II - Competitor Monitoring Assessing the Landscape Identify your competitors Monitor your competitor’s use of UBI, e.g. geographical coverage, market Learn how your competitors are using UBI, e.g. mileage, driving patterns Competitive Positioning Determine your competitive position without UBI Estimate how various UBI program designs will change your competitiveness Ensure selected UBI program allows you to compete Impact Monitoring Review conversion rates for changes Compare actual vs. expected results Monitor competitor response, program changes

10. Usage Based Insurance Update 10 Part II - Rating Plan Design Mileage Monitor Credits/Surcharges based on Driver Behavior Driver Score/Grade Design Options Establishing Initial Factors/Credits/Surcharges Affected Coverages Impact of “Opt-In” Program on Overall Rate Adequacy Reduced Impact of Other Rating Variables Patent/Trademark Infringement Considerations

11. Usage Based Insurance Update 11 Part II - Regulatory Support / Filing Regulations - Overview Not all states have UBI regulations State regulations vary significantly What the future holds Current Regulatory Climate DOIs Recognize Benefits/Have Concerns Ask Many Questions Rate, Rule, Form Filing Review

12. Usage Based Insurance Update 12 Part II - Rate Filing Support - Overview Rating Manual Statistical or Competitive Justification Prove not “Unfairly Discriminatory” Support Requirements Strategic Timing Confidentiality Additional Considerations

13. Usage Based Insurance Update 13 Part II - Regulatory/Rate Filing Support - DOI Questions Device Functionality Data/ Support TransparencyPrivacy

14. Usage Based Insurance Update 14 Part III - Important Approved UBI Filings DTRIC Allstate (although there are many others) Towers Watson ISO Data Library

15. Usage Based Insurance Update 15 Part III - Current Environment and the Future Did Progressive scare everyone off? High cost of both UBI deployment/integration Patent Update/Lawsuits Patent Licensing/two basis points of CW DWP Where is the industry Companies can start using UBI data for pricing on 4/1/2015 Will patents hold up in courts Towers, Insurance Services Office (ISO), etc. Will all insurance carriers eventually have UBI? Near Future…

16. Usage Based Insurance Update 16 Part III - Historical Billings DTRIC - $100,000 Approx. (Pilot) Market Solutions - < $10,000 Historical Billings Written a few other proposal Gave a few presentations Went to a number of conferences We have a marketing brochure on perrknight.com No additional work as of today Is there a market for UBI sales? Data Library Proposals / Future Sales

17. Usage Based Insurance Update 17 Questions Michael J. Covert, FCAS, MAAA Principal & Consulting Actuary Perr&Knight mcovert@perrknight.com 201.963.1550 x2104