As conversations around consumer use of connected and autonomous car data increases, more and more players are coming out with innovative insurance solutions, adding further complexity to an already complicated ecosystem. In a previous post on this blog, I discussed how digitalization and the connected car are taking the auto industry in an exciting new direction. Here, I’ll take a deeper dive into the challenges and opportunities facing both insurance carriers and auto manufacturers as usage-based insurance (UBI) becomes a cross-industry solution.
Mosaic of rapidly changing industries involved in telematics
The most obvious result of this increasingly complex ecosystem is the number of data sources currently available to the insurance industry. Over the past five to ten years, we have seen the development of OBD-II devices, black boxes, smartphone-only solutions, and tethered smartphone solutions. Five years ago, the insurance industry had limited ways to collect driving data economically; today, due to an abundance of options many insurers are paralyzed trying to select the “best” option. If executed correctly, insurers do not have to select only one data source – with the ability to normalize data across different sources, insurers can select a range of methods to support the disparate needs of their different customer types.
Faced with this decision, many insurers are tempted to “wait” until the connected car can provide this data, betting on the “connected car” to provide an industry standard data. However, the OEM-supplied data will be diverse, complex and non-uniform. Data normalization will continue to be critical for the insurers and they will require the flexibility of various data capture methods for scaled UBI program deployments. This challenge will persist even as OEM data becomes more widely available, as each OEM will have its own data sets, components, and legal and business challenges.
Adding to this complexity is the fact that insurers and auto manufacturers are in different industries and may not understand each other’s businesses very well. In the long term, OEM data will be the primary source, but critical standardization work remains a necessity. For connected car-focused automakers, the challenges seem to be converging on:
- Determining their level of involvement with a heavily regulated insurance industry;
- Selecting the right data management partner to eliminate the need for multiple integrations with insurance companies and to ensure data security; and
- Maximizing opportunities to integrate vehicle data throughout the insurance policy lifecycle and designing a seamless customer experience.
Due to the complexities of insurance data programs, it is critical for insurers and automakers to work together to develop solutions that will match the speed of change as well as consumers’ increasing expectations.
Over time, innovation in this area will only create larger and more diverse datasets, so scalability and normalization will be key to successful UBI programs.
LexisNexis Risk Solutions focuses on its core competencies, which are to take large fragmented datasets from many sources, normalize the data to consistent formats, and deliver it to insurers when they need it to make decisions. For more about how we support OEMs and insurers, contact our telematics team here. You can also subscribe to this blog to make sure you don’t miss an update.