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by Tom Lawrie-Fussey
I recently attended a connected car conference in London which focused on the impact of the ever-increasing levels of connectivity in our cars. Nothing new there, I hear you say - but what might surprise you was that the target audience was vehicle insurers, not the car manufacturers (OEMs).
The car is a target for almost all industries at the moment. OEMs are increasingly selling cars with SIM card connectivity built in. Allegedly Apple is building a car. Google is already in-car with its range of navigation and information aids, and a high profile push towards autonomous vehicles. And so these enabled cars are bringing new opportunities and threats to the traditional vehicle insurance market – while they may ultimately reduce the total number of collisions, cars will always be owned by someone, and the asset risk will need protecting. In short, it’s a crowded market, and getting more so. The value to all of the players of knowing who, where and how we’re driving is huge, and has the potential to enable multiple revenue streams.
So what? Well, I predict the outcome of all this will impact us all. Maybe we’ll only be able to buy a car with insurance built-in, much like some hire-car agreements at the moment.
As data-ownership becomes an increasingly sensitive topic, another possible conclusion is that we each own our personal driving data, and only offer this to the insurers to quote against. Think of a future price-comparison website, where instead of entering name, profession, postcode, no-claims bonus etc, you would allow the brokers/aggregator companies to access your driving data. You may choose not to share your typical speed, or usual commuting route, the decision is the drivers and to share more would potentially save more.
The insurers would probably prefer a slightly different future. They need to remain relevant. Even with autonomous cars, someone has to ‘own’ the risk. Similarly, whilst the data-ownership model could be compelling for the consumer, it still needs the industry to offer and support it. And that’s a big step.
Lots of start-ups are trying to exploit this innovation opportunity by invading this market – offering differentiated insurance products, and using customer-centric models - but they need scale to succeed, and fast.
A more believable outcome would be where an established insurer gains both a cost and market advantage by providing a quote based on your actual driving style, and not just the boxes you filled in. Those drivers that currently look low-risk on paper, and yet drive dangerously, will be first to look elsewhere for future quotes which would reduce costs and allow more competitive quotes for the majority. Over time, the insurer would be able to build their risk-portfolio based on data, not assumption. Essentially, if done correctly, technology could enable the holy grail of insurance. Mass-market ‘truth data’, data gained by direct observation.
So why hasn’t this become the way all car insurance operates? How hard can it be, as vehicle telematics is not new. Black-boxes? Plug-in dongles? Smartphone apps?
There are plenty of potential solutions, but there is no clear winner. Anything that comes built-in to our cars by the manufacturers tends to be unpopular if it’s deemed too ‘Big Brother’. Anything that is retrofitted into our cars has an inherent device and installation cost, so will never be mass-market. Anything that runs off a phone has a fundamental limitation - was that a big crash, or did you just drop your handbag into the footwell?
The market is converging, but slowly. Something is missing. The current manufacturers of low-volume, high-cost black-boxes are constantly developing smaller, cheaper kit. But could all policy holders be expected to fit their own devices? Apps are great, and constantly getting better, but there will always be fundamental limits because they are not linked to the car. Whilst most new cars are being offered with connectivity, we still (largely) prefer to keep vehicle insurance separate from vehicle purchase.
Could this be a classic case where the digital revolution could disrupt an industry established for decades? Who will win? Who will own the ‘truth data’ that could unlock competitive insurance? A solution that enhances the customer experience, saves us money, delivers more brand loyalty to the market, and potentially even helps to saves lives. Is this too good to be true? And could such a solution ever really exist? I think it could, and more importantly for those looking to invest in product/service propositions in this space, it doesn’t exist yet.
If you’d like to know more about how we could help you to uncover, react to, and ultimately solve, similar opportunities, please do get in touch.
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