The automotive industry is built on more than 100 years manufacturing, of metal bashing, factories forging vehicles from steel. But times are changing. Your next car will probably be a connected car and it could be the most powerful computer you own, powered by the latest edge computing, scalable IT architecture capable of 24 trillion deep learning operations per second (in the case of a fully autonomous vehicle).
It won’t be long before car manufacturers eschew the traditional ‘model year’ cycle and owning a car will be like owning a smart phone: it will be subject to continuous software upgrades. The whole concept of mobility and car usage is going to be changing, with challenges for process flows in insurance and risk.
The connected car is already here, the data is flowing (in so far as there are today around 1.4 million connected vehicles sold every month), and the OEMs and the insurers are amongst the first in line to benefit.
Telematics data is flowing into insurers’ systems from phone apps, black boxes, plug-in devices and onboard diagnostics (OBD) connectors. Increasingly it’s delivering accelerometer data, impact, aspect, location, and other data relevant to claims, whiplash cases or other high-value incidents.
Insurance companies have now launched nearly 250 telematics programmes worldwide, in twice as many countries compared to two years ago. Embedded connections in new vehicles – and controlled by the manufacturers – are increasingly becoming the hardware through which all of that risk data flows.
Insurance providers must future-proof their systems in relation to connected car trends
It’s accepted – and defined in data regulation – that the consumer has to retain control of their own data in all of these industry changes. But many have begun asking questions such as, who owns control of the underlying vehicle data? Is it the driver? Or the insurer? Or the OEM?
In fact it will necessarily involve the company creating the actual technology, and all parties involved in processing the many micro-steps the data will take. But how will that data be used to create peace of mind for insurers and consumers alike?
Our telematics services at LexisNexis Risk Solutions are being continually refined to support the full spectrum of needs of the global and national insurers, and brokers, including:
- Driving data, scores and score models (new insights and new data sources for those national insurers already with extensive telematics capabilities)
- Product development and technology upgrades (for insurers seeking better and cheaper driving data or full end-to-end product management)
- Raising underwriting confidence and improving pricing (strengthening the telematics proposition for insurers seeking to target new consumer segments)
- Improving loss ratio performance (transforming the book risk and rating factors by reducing the cost of collisions, typically for the largest, multi-national insurers).
At LexisNexis Risk Solutions we are also partnering directly with several of the global vehicle OEMs for various aspects of the connected car and usage-based insurance solutions.
From the viewpoint of the consumer, our data is empowering insurers to offer lower premiums and win more (and more qualified) customers by minimising risk exposure, reducing application fraud, and realizing cost savings by improving manual processes.
Meanwhile, the profits of the vehicle OEMs are being increasingly split into the traditional (declining) profits from vehicle sales, and the new profit streams from connected services that require more of an aftermarket relationship with motorists.
Insurance providers and car makers partnering around consumer solutions
Software is set to define automotive in the years ahead and an understanding of how insurance will fit into the new world of aftermarket services is going to be critical to success.
The direct consumer relationships owned by the insurers are being sought out as partners of the vehicle manufacturers, who in turn are looking to triple their revenues from motability schemes in the UK and connected car services to around $155 billion by 2022.
Multiple paths for new connected car services
The new connected services of the OEMs fall into three main categories: safety (such as eCall alerts in the EU), connected services (such as infotainment or vehicle management) and autonomous driving. These all rely on some elements of cooperation with the world of insurance and risk, and include things like:
- Sales of connected car packages to consumers bundled with new cars (BMW ConnectedDrive, Mercedes Me, Mitsubishi Connect, GM OnStar and Tesla’s integration with Apple are examples of this, as are Android Auto and Apple Car Play)
- Use of connected car data to interface with the smart home and other parts of the external environment (such as the Control4® app or AT&T Digital Life)
- Use of connected car data such as diagnostics for improving internal efficiency, quality, product differentiation, warranties
- Use of connected car data to measure telemetry and safety on the road, for optimising and prioritising Advanced Driver Assistance Systems (ADAS)
- Use of connected car data to defend vehicle list prices through differentiation, reinforcing customer loyalty through the ecosystem
- Establishment of a comprehensive ecosystem of consumer services, with revenue sharing (for example fleet management or usage-based insurance)
- Creation of wholly-new systems for OEMs using customer data, such as a database of customer data, to be monetized through future (and mostly unknown) applications such as robo-taxis or other services that may evolve with smart cities.
In terms of the flow of data we are already in a scenario where new types of data are flowing into the motor insurance world: vehicle data and the insured’s data, but also driving data, activity data and environmental data.
The sophistication of sensors and telematics data is meanwhile growing, and the cost of data acquisition is falling. The integration of near real-time telematics data into claims processing is just a few steps away.
More and more insurance companies who launched with a ‘go-it-alone’ approach to telematics insurance products are finding that the scale of the global challenges, working with different vehicle types and data sources, are very challenging and requiring a global approach to agreements, across platforms.
Connected car solutions demand partnerships and imagination
Rather than excluding the OEMs, the data in the insurance process flow will in future include the vehicle maker in some sense, depending on the contract for the vehicle. For their part, the OEMs have some incentives to keep this information proprietary, rather than sharing it. The evolution is going to require a balance between the essential standardization of the ecosystem, and the elements of competition.
Most major players in the connected or self-driving car space have several partnerships and several different angles on the lens of integration, not just one. There are nearly 50 companies building software for different control elements of the autonomous vehicle, including the automakers: Microsoft (with Azure) and Baidu (with Apollo), VW (with robotics specialist Kuka), Toyota’s investment in Uber, GM’s in Lyft, and so on.
Currently the smart car market is still young and almost every player with a tangential interest in the related technologies finds itself being challenged, and having to compete.
Traditionally we would regard this as a kind of ‘arms race’ with data, that will involve winners and losers. But looking ahead – with so many complex relationships – it is going to require partnerships and imagination.
It feels as if there is a tipping point approaching in which telematics and connected vehicles could increasingly define the core structure for insurers’ systems, rather than being the ‘tail that wags the dog’, or just an add-on business.
Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurance providers.