Forging the new UBI relationship between insurers and carmakers, explored by Simmi Sinha.

As connected vehicle technology and telematics evolves in the insurance industry UBI continues to expand in the global market. Connected vehicle manufacturers, having embedded telematics systems, are now in a position to control access to the information and usage data, creating a concern among the insurance providers. 

According to Andy Goldby, chief product officer, The Floow: “Historically Insurers and OEMs have not necessarily been 100% aligned.  Despite there being some partnerships around specific insurance deals (e.g. UK Insurance) and the PSA Group, there was often a perception that insurers did not really want to use OEMs to carry out repairs after an accident due to a need to minimise costs and OEMs did not want to share their data.”

He further adds: “With the advent of eCall and the necessity for OEMs to collect more granular data there is an ever increasing pressure on OEMs to subsidise this cost by monetising the data.  Of course, there are always the hurdles of customer consent and data privacy to overcome but if the customer is always asked to consent to the use of the data and the data is always well controlled and used only to the benefit of the customer then these can become non-challenging formalities.

“The data available can be significantly different between OEMs, ranging from summary distance and fuel economy data that is only really suitable for pay-as-you-drive to granular location and vehicle safety data that can be used to create a very detailed understanding of the vehicle's mobility.  However, when used in the right way it can all be used to make mobility smarter and safer as well as reducing the impact on the driver’s pocket through lowered fuel and insurance costs for safe and low mileage drivers.”

UBI in the era of connected vehicles

Industry trends among automotive insurers and carmakers are having a profound and disruptive effect on each other. According to Dave Huber, telematics consulting, Kairos Solutions: “Proprietary UBI programmes, only economically viable for the top 25 or so US insurers, will give way as contextual driving behaviour data becomes available directly from the car and a portable driving score emerges, similar to FCRA-governed credit scores.  Developing and administering a UBI programme has proven to be an economic hurdle too high for most insurers.  The amount of driving behaviour data and corresponding loss history required for predictive modelling and regulator-controlled rating is also a big burden for insurers and TPS.”

Here Goldby chimes in: “As more vehicles come off the production lines with semi or fully autonomous functions, a detailed understanding of who was in control when, and how good the driving was, will be important for the OEMs to be able to evidence the improved safety of their new vehicle systems and for the insurers to, not only price the risk, but for liability to be correctly apportioned in the, hopefully remote, case of an accident happening.”

Huber adds: “Is it possible, despite underwhelming penetration of UBI, that UBI’s early adopters, insurers who felt they were paying unfair rates and were willing to share their driving data to prove they deserved better, have been subsidising a share of the market and caused enough adverse selection to actually contribute to rising loss costs and 110 combined ratios?

“Auto insurers battling profitability pressures, are unlikely to make investments in UBI programmes.  Historically insurers cut costs and raise rates to fix problems.  That’s not to say they don’t believe in the predictive power of driving data and even hate Progressive and Allstate for disrupting the market (think credit).  What they do want is for the playing field to level just like it levelled when an industry-specific credit score emerged to combat pricing advantages enjoyed by the early users of credit.”

Insurers can get ahead of the curve

Rutger van der Wall, vice-president, global products, LexisNexis, believes: “The automotive ecosystem is undergoing a transformation: personal vehicles are increasingly digitised; alternate options such as ride-sharing are gaining in popularity. Insurers, auto manufacturers and technology providers each play an important role in this ecosystem transformation. Those who lead it will gain the most benefits. Those who hold back risk being left behind.”

He is confident that: “Insurers who proactively engage in reciprocal relationships with forward-thinking auto manufacturers and technology providers can accelerate this transformation while, at the same time, help manage and reduce emerging risks. These insurers are leveraging technology capabilities that facilitate the collection and normalisation of driver, user and vehicle data across devices, opening the door to new revenue opportunities and improved customer experiences.

“Third party vendors are playing a game-changing role by providing applications that facilitate the data collection process. The company’s Telematics Exchange solution is helping to drive a new model of relationship between insurers, auto manufacturers, third party vendors and technology providers,” says van der Wall.

Huber, too, expresses his thoughts on insurers and carmakers: “Access to driving data through OEM-controlled, embedded hardware and head-unit apps will democratise UBI.  Insurers will no longer have exclusive access through proprietary programmes.  ‘Driving data bureaus’ (again, think credit) are emerging.  Vehicle owners will have control over the capture and sharing of their data, along with review and dispute ability.  These bureaus will develop and sell predictive driving scores to insurers, and others, who have permissible purpose. The score will become a rating variable at new business and renewal for the entire auto market and will give most insurers what they really want – the opportunity to NOT have a UBI programme... and all the baggage that comes with it.”

[Ins.Sinha.2017.07.11]

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