Insurance could become a new battleground of revenue for carmakers, discovers Andrew Williams
As more and more carmakers and telematics service providers (TSPs) move into the motor insurance market, the traditional relationships between car and equipment makers and insurers is being shaken up into something that could become a commercial battleground.
As telematics technologies move beyond basic 'black box recorders' that simply report on driver behaviour towards much more sophisticated data provision systems, insurers are increasingly able to understand driver behaviour and understand what happened during a crash. The advent of machine learning and improved data storage methods also means there is now an even-greater capacity to analyse and understand trends. As Jonathan Hewett, CMO at Octo Telematics, explains, companies using telematics data are now able to create databases that can cross-reference accident locations, as well as driving behaviour across demographics and other pattern data, which can “assist them in refining their risk pricing from each driver's unique driving DNA and its place in a wider picture”.
The ubiquity of smartphones and the increased sophistication of apps also means that telematics is now more accessible than ever before with wearable data collection devices also adding to the range of potential data collection sources, helping to deepen the relationship between insurers and drivers. Another interesting example is car giant General Motors (GM), which has collaborated with Progressive Insurance to create a programme that allows GM customers to share driving data from their connected car with Progressive in exchange for discounted car insurance.
“The model we developed with them is very promising because it creates value that is shared between the consumer, GM, and Progressive,” says David Pratt, Progressive general manager, UBI.
As cars become ever more complex, on-board software is now used to run a range of systems from engine temperatures to Advanced Driver Assistance (ADAS), helping to improve safety by automating and regulating crucial functions. Software updates can also be carried out easily with insurers and manufacturers increasingly able to keep in contact with cars and carry out health checks to assess vehicle condition and update risk pricing accordingly.
“There is an onus on drivers to make sure their car's software is fully updated but there's also an opportunity for manufacturers to send alerts if tyres or crucial parts are close to wearing out. Drivers are able to play a more active role in their vehicle's maintenance and take control of their insurance by not only driving safely but keeping their cars in the best possible condition,” says Hewett.
Although Hewett is confident of the long-term advantages of such enhanced data collection and usage methods, he also stresses the vital importance of using data provided from telematics companies in the “appropriate format for each requirement” and of “responding to the exact purpose that it will be used for”. For example, while an insurer may need data showing the times of day that a driver is most likely to have an accident, a manufacturer is perhaps more likely to be more interested in the way the vehicle reacts in the most common types of crashes. While both clients require precise data, with a high-degree of granularity, Hewett points out that it must also be collected in volumes high enough to “provide the best reference and build accurate trends”.
“Constantly being able to update this data will mean that policy adjustments can be made in real-time if necessary and manufacturers can stay up-to-date with requirements,” he says. “Telematics companies should be continuing the move from hardware providers to fully-fledged data companies, using a range of methods and devices to gather information and analyse it. By providing data to clients, telematics can offer value throughout the chain and enhance overall vehicle safety and reduce insurance premiums.”
Collaboration or competition?
Looking ahead, Pratt predicts that the model developed by Progressive and GM “will be adopted by more OEMs” as they deploy connected vehicle technology in new cars that can accommodate UBI. “We also think there will continue to be partnership opportunities between OEMs and insurance companies, because there are interesting ways to create value through these partnerships,” he says.
Meanwhile, Hewett expects machine learning and better data storage to emerge as another key trend, helping companies to create “even more accurate profiles of drivers and trends across demographics” and provide benefits to “every member of the value chain”.
“The relationship [between carmakers, telematics companies and insurers] should be collaborative. The steady flow of data can create a virtuous circle. As data volumes and analysis quality increase, insurance policy pricing models will also be improved,” he adds.