Speaking last year at the Davos summit Mary Barra, Chairman and CEO of General Motors, said the auto industry is going to change more in the next five to ten years than it has changed in the last 50 years. Major technological change like the connected car and usage-based insurance (UBI) powered by telematics rarely happens smoothly, like a line graph. Rather it tends to happen in waves.
It was a hot topic at the World Economic Summit last year and it’s also been discussed at other industry meetings such as TU-Automotive or the Internet of Insurance. Today we are at the start of a revolution in the car industry that goes much further than just retro-fitting telematics devices. It is moving to factory-fitted telematics devices and ultimately ends in automated driving.
From the view point of the major car makers, the revolution is being driven by connectivity, advanced driver aids (and in future full driverless technology) electrification and society itself, which is getting used to completely different types of mobility, with new players like Microsoft (with Toyota®), Uber, Google and Apple® moving into the automotive world.
We are moving suddenly away from an industry that for 100 years has relied on mechanically-controlled, petroleum-powered vehicles.
Connectivity goes to the heart of many advances in vehicle safety, such as driver coaching with telematics programmes and all the other new advanced driver assist systems (ADAS) such as blind spot detection, lane assist and automated braking. By 2020, the big car makers expect more than 75% of the global vehicle output to be actively connected.
For the consumer, connectivity gets pretty exciting when it can automatically transmit vehicle diagnostics, connect to other vehicles on the road, sending real-time alerts for emergencies or other things like traffic flow, suggesting alternative routes or useful travel information. Connected car services will include:
- Vehicle-to-Vehicle (V2V)
V2V will allow cars to communicate with each other and share information about incidents ahead, vehicle speed, direction of travel, traffic jams and road and weather conditions.
- Service and Recall
Transition of vehicle diagnostics, service reminders and steer into the closest available service centre. Real-time recall management
More bundled programmes (car plus insurance and mobility package). Using the connected car to provide insurance rateable information at point-of-quote
- Consumer Services
Connectivity in car and use of the car as a wireless hub. Vehicle- and location-linked applications (of which there are hundreds in development)
- Data Analytics
Determining effectiveness of safety devices and technology on insurance rating, Does a product like lane departure warning mean a car is less likely to be involved in a collision? If so by how much?
A report from the UK’s Department for Transport with modelling from the Centre for Connected Autonomous Vehicles estimates that journey times on major roads could be reduced with V2V by more than 11% and delays cut by more than 40%. The US Department of Transportation estimates that V2V could eliminate up to 80% of traffic accidents that now occur on US roads, accidents that claim over 30,00 lives per year.
From our point of view at LexisNexis Risk Solutions, as the leading telematics provider in the UK (defined as supporting the largest number of telematics policies) we have a constant eye on innovation.
Whereas motor insurers have experimented with telematics since 2010 and achieved significant penetration in commercial fleet, the UBI (usage-based insurance) market today is still quite niche, representing an estimated 3% of all motor policies, but 60% to 70% of all inexperienced driver policies.
Auto-connectivity represents one of the larger opportunities to take UBI mass-market and make it more ubiquitous. As the UBI sector evolves with a greater role for telematics embedded in new vehicles, there will be a need for more data matching and verification at scale across many different vehicle types and other devices. We see a journey towards ever-greater precision of telematics for risk purposes, but this is a complex challenge.
The automotive OEMs today have two distinct, but related opportunities to work with telematics and the motor insurance industry:
- Work exclusively with a single insurer group to launch packaged mobility services (for example the bundling of vehicle purchases with insurance, vehicle finance and connectivity services to provide an overall ‘best-deal’)
- Utilise the driving data collected in the vehicle, and allow consumer choice to provide this data for use at point-of-quote (thus allowing safer or low-risk drivers access to discounted premiums).
Many insurers are finding this is hard to manage. It requires outsourcing on a global scale and increasingly it will become a point of huge competitive advantage. As the volume of connected cars on the road increases, then the revenue opportunities from these two approaches increases exponentially.
From our discussions, we know the vehicle OEMs are interested in the data space and everything that supports the connected vehicle from both a commercialisation of service and customer service perspective.
Our role in this new emerging world will be to help insurers to: understand the opportunity in the total vehicle eco-system; to provide the technology to score and rate driving data at never before seen volumes; and to work with the OEMs to learn, configure services and support the industry on this unprecedented journey.
Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurers.