Few, if any, drivers today think of their cars as moving platforms for software, apps, and connecting and transmitting data to other devices. However, some recent reports highlight how digitalization and connected cars have started taking the auto industry into an exciting new direction.
Driven by shared mobility, connectivity services, and feature upgrades, new business models could expand revenue in the automotive industry by about 30%, according to McKinsey & Company, adding an incremental $1.5 trillion per year by 2030.
The report presents a view of the auto industry, just over a decade from now, in which traditional car sales and aftermarket products will be supplemented by new and diverse sources of revenue. These include infotainment, remote monitoring, alerting, fleet services, personalized services, and data services for insurance, parental monitoring of young drivers, and other uses.
We recognize that with connectivity becoming ubiquitous and the integration of autonomous technology, the car will become a platform for drivers and passengers to use their “in-vehicle” time for activities other than driving. Increasingly, software-based systems will allow cars to become more upgradeable as well, and this same platform will power telematics and usage-based insurance (UBI) services to an ever-greater degree.
And yet, when we talk about the “connected car” and the “autonomous vehicle” in the insurance space, with all the attention it garnishes in the media, it has not yet matured to be a single homogenous technology that we can define easily. What’s more, the way that different insurance markets intersect with this new connected platform varies around the world, and the eventual business models are likely to be quite different from one market to another.
Fragmented data gathering solutions
At the most basic level, there are some hardware differences in the readiness for taking existing vehicles and connecting them to telematics and other devices.
Increasing car connectivity does not eliminate the fact that telematics data can be obtained via multiple sources. Today, the most successful UBI programs allow consumers the flexibility to use the data collection method most suited to their needs, and are not tied to a particular method. These device-agnostic programs will remain necessary for years until connected cars make up the majority of car park.
Legislative and regulatory policy regarding the use of telematics by insurance companies is nascent and still developing. State and federal laws have not kept pace with the realities of the rapidly changing market for automobiles and automobile insurance. In the US, regulation differences span across multiple states; some have very strict guidelines about the data set insurers can access.
As conversations around consumers’ usage of connected and autonomous cars intensify, new industry players add additional layers to an already-complex infrastructure. This leaves auto manufacturers and insurers to face the challenge of integrating the two industries quickly, while also remaining focused on their respective top priorities. In the next of our series on the journey of the connected car, I’ll dive deeper into the types of challenges original equipment manufacturers (OEMs) face. Follow the link to the LexisNexis Risk Solutions website to find out more about how insurers can stay abreast of changes in telematics and the connected car.