Connected Cars: Tech, Data & The Future of Insurance
This month IE magazine decided to take the temperature of the connected car insurance market. What a year 2020 has been, and the working-from-home lockdown may well prompt a million drivers or more to severely reduce, or perhaps stop their daily commuting habit forever. The FNOL and salvage market has been dealt a heavy blow, as a sudden dip in accidents means less work for everyone in the food chain.
What now? As insurers adjust to the new normal, technology still gathers pace. Semi-driverless cars, more in-car passenger and driver data to cherry pick – subject to gaining consent. Smarter telematics, automated MTA admin and claims settlements. More write-offs as the spares supply situation changes irrevocably. These are truly interesting times, as the ancient Chinese proverb notes.
Let’s start with the data, because that is the rock star way we roll here at IE mag;
INSURANCE CAN BECOME BESPOKE THROUGH DATA ANALYTICS
Rich Tomlinson at Percayso Inform, knows all about data, as the Nottingham based company essentially sandwiches data from all kinds of sources, so that insurers can get a 360 degree view of a person, and a car, before offering to Quote;
“Consumers are gradually realising that their personal information doesn’t belong to their bank, their insurer or indeed any other company – rather, it’s their data and, since the advent of GDPR, they’re becoming more aware that it has some value. While they’re used to sharing basic information when it comes to getting a quote for their car insurance, they’re wising up to the fact that providing a bit more personal data could help obtain a lower premium or more personalised cover.
There’s research out there that indicates almost two thirds of consumers would be willing to share information about their driving behaviour and health to get a discount, while around a third would share their credit score and even DNA data to get a personalised offer or service.
This is certainly consistent with the findings of our own more recent research which revealed that 59% of consumers would be likely to share their credit history with insurers if it resulted in cheaper car insurance.
The advances being made in car technology are opening up whole new ways for motor insurers to get more creative in how they package up new offerings for their customers, but this undoubtedly means that they’ll need more personal information from their customers to do so. To get that data, there has to be a quid pro quo.”
It’s a valid point; consent is more likely to be given if drivers feel they’re getting something in return. That isn’t always a case of just getting cheaper premiums. It can be back-up in the event of a breakdown or emergency, or driver coaching.
Mike Brockman at ThingCo told IE recently that the emphasis on selling telematics black boxes to the Under-25s is outdated;
All drivers can understand the benefits of having a tracker inside the car from a safety point of view. A driving coach that alerts you when speed limits change, or there’s a hazrd ahead, plus an immediate response if the in-car gadget, such as Little Theo, detects a collision is another peace-of-mind feature that insurers and brokers can sell. Modern devices like ThingCo’s Theo have voice recognition, so an insurer knows which driver is using the car in a household and in time, the data accrued can give a detailed picture of how each driver navigates particular routes, or copes with varying conditions.
There is so much to come from telematics, and if you look at the voice login feature used for the NHS/pharmacy volunteer delivery scheme during Coronavirus, you can see the benefits long term for the self employed, or small businesses from utilising this technology. It’s about insurers knowing their customers, and communicating with them beyod renewal, or policy admin points.”
MORE ADAS SYSTEMS COULD MEAN MORE REPAIR COSTS
Advanced technology is wonderful, but it is making the business of repairing damaged cars more complex, and therefore expensive, as noted by Tim Kennedy, Solution Alliance Manager at Guidewire Software
“One of the biggest trade-offs in all of the new sensors built into bumpers for things like emergency braking is that while it reduces accidents, it correspondingly increases the repair costs to the bumper for even minor accidents. Bumpers have gone from being fiberglass to computers.
“All the motor telematics companies are seeing that their hope of mass adoption of telematics for personal motor have stalled. Somewhere around 20% of drivers use them and it has been flat now for several years. But, those are generally the lowest risk drivers. Beyond that, there is no incentive. So, we are seeing consolidation in the industry, and a move to pivoting their technology to embrace IoT for smart home, and smart office. For example, Octo has completely redeveloped their technology for this because telematics adoptions have stalled. Others are aggressively moving back into fleet insurance where adoption by drivers is mandatory by the companies.
“So, while IoT has helped, until the regulators allow for IoT data to be used to raise insurance rates for riskier drivers, for example, and carriers can be more aggressive in mandating their use, we are at a bit of a plateau where carriers are now just looking to drive cost out by going to smartphones, or connected car.”
WILL YOUNGER PEOPLE SIMPLY GIVE UP ON CAR OWNERSHIP?
Owning a house, especially in the South-East of the UK, is something of a distasnt dream for many under 30s in the UK. It’s similar story with car ownership, although it isn’t the entry cost, so much as the daily ULEZ/road toll charges and other costs, such as parking, which make owning a car in London a non-starter. Will ride-sharing, hiring cars or Uber rides simply replace car leasing/buying for younger drivers?
“As mobility patterns change – through natural evolutions in our urban centres, younger adults choosing not to own a car and consumer opinions on monitoring driving becoming more accepted or, as a result of large scale global events such as the COVID-19 pandemic – the potential for telematics adoption is rapidly evolving.
At the same time, new sensors provide a better understanding of driver behaviour and more predictability, whilst vehicle enhancements and assistive driving technologies are altering driving behaviours. All of which impact on the type and likelihood of incidents occurring, affecting traditional risk modelling.
These changes have led many insurers to consider smartphone-based solutions which reduce time to market, allow insurance to be provided only when required through pay-as-you-drive solutions, and help create engaging insurance propositions. As a result, we believe there will be a significant expansion of the telematics sector in the next two years.
Furthermore, the rise of the connected vehicle is likely to drive radical changes in the data available from auto manufacturers, making it essential that insurers find partners ready to engage with this data, who can participate in this changing ecosystem.”
WILL MANUFACTURERS START SELLING THEIR OWN INSURANCE BASED ON DATA?
It’s an interesting avenue to explore, because as car-makers extract more details on exactly where a car is parked, typical commutes, shopping locations etc. plus speeds, braking force, and the activation of various ADAS systems in terms of frequency – or the disabling of some ADAS systems – then they could, in theory get a quote on driver risk based on that harvested data.
“Right now insurance is an incredibly difficult thing to do, and I think manufacturers recognise that. They’re building semi-autonomous cars now, and that technology is still taking up a great deal of knowledge and research on their part. Whoever asks the customer to share their data will have to offer something in return.
We did a presentation recently titled Insurance 2025, and that looked at how a claim might be settled then, assuming that much more connected data will be available then. Apart from the data in the car regarding speed, location, the impact itself etc. you have all the driver information, traffic cameras, maybe even footage of road conditions from drones that day and so on.
For manufacturers to do all that, on top of building and marketing their cars, is a big leap. Perhaps for a brand like Tesla it fits their strategy better than a more mainstream manufacturer.”
ANOTHER POINT OF VIEW
Andrew Little, Head of Sales, Redtail Telematics
Do you think telematics are going to be built into new cars as we switch to electric vehicles?
Telematics capabilities are increasingly available in new, connected cars, both on a commercial and consumer level. However, the ability to deliver valuable data to either business or consumer is still in its infancy, so there is work to be done to tune available data to particular use cases. At present, there are some emerging priorities, for example in insurance, which will accelerate the evolution and relevance of specific elements of available telemetry.
Most smartphones already deliver a range of data, both in and out of the car. Can insurers gain consent for cross-selling of products, and have they been a bit slow to see this opportunity?
A couple of years ago there was a plan by a large UK insurer to use social media data to help price insurance policies – which was ultimately blocked by Facebook is evidence that insurers are starting to wake up to the potential benefits of the vast amount of data now available from smartphones, however, the buy-in from customers and GDPR stipulations mean that there are strict guidelines to adhere to for any insurer when it comes to using customer’s data.
Insurers are starting to lean into the idea of micro-segmentation when it comes to clients: looking at more than just where a policyholder lives or their driving experience when it comes to pricing a motor policy, for example.
The value to the insurer in analysing this kind of data from multiple sources is that it can better understand how it might be able to cross-sell a range of products to the consumer, depending on their lifestyle and habits.
Shared cars, more renting than owning – if that’s the future for cars does telematics have to be more focussed on the individual than the vehicle?
Carsharing companies need to protect their assets (vehicles), but also, engage with and identify customers/subscribers and permit them to drive a car at a given time, so it’s imperative that telematics data pertaining to individuals can be accessed by car-sharing companies to ensure the security of the individual and the vehicle. Sharing an individual’s data between insurers and other carsharing providers remains a challenge because of GDPR governance and obtaining an individual’s consent to accepting the sharing of their personal data.
The future for car insurers and brokers remains bright, despite the impact of Corona. There’s still a legal requirement to have insurance, and technology is here that allows innovative thinking in terms of shared car ownership, driving, and Business cover that can be switched on and off for small traders and self-employed delivery people.
Companies like Zego are showing the way on that front, with delivery rider insurance that’s affordable via micro-payments, per day, per job. There’s no reason why that business model cannot transform the mainstream car market, and more especially the classic car sector, where cars are often ONYL driven a few hundred miles each year.
Enhanced IoT, credit reference and social media channel data will transform underwriting. Driver data record portals that are truly portable, from one insurer to another, will make the old fashioned black box redundant, and open up the market for those brokers and insurers who can grasp the opportunities presented by the New Normal.
Brace yourselves, it’s going to be a rocky road ahead, but the phasing out of boring old annual Fully Comp policies might be a refreshing change in the long run.
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