Connected Car Insurance Europe 2016, Day One: Data empowers Insurance products and services

The first ever Connected Car Insurance Europe 2016 opened with a reflection on the latest trends in the insurance industry. Delegates heard that telematics as a technology has the ability to collect data to empower products and services. This is forcing car manufacturers to look at changing their traditional business and, as a result, insurance companies should do the same.

Throughout the conference questions were asked not just about the journey forward for connected cars but about the way ahead for the development of autonomous automobiles from a technological perspective as well as from an insurance industry angle. In essence the autonomous car is going to disrupt the insurance industry because, without a driver, there remains the unanswered questions, which are being discussed widely, about who or what should be responsible whenever an accident or an unforeseen incident occurs in the absence of a person being in control.

The connected car and taking UBI mainstream

Paul Stacy, Wunelli founder – R&D director at LexisNexis Risk Solutions – discussed how to make usage-based insurance (UBI) mainstream. “I need to start with the customer because if usage-based insurance doesn’t do anything, then we aren’t on to a winner,” he said before explaining that there is a need to use UBI to change driver behaviour. For example, he revealed that between 2009 and 2014 there were 3,611 accidents caused by a least one of the drivers involved in each using a smartphone. He also claimed that over an average lifetime every person will have eight friends or family members who will be injured in a road traffic accident and another person they know will be either killed or seriously injured.

Distractive driving is mostly caused by people using phones. When drivers are distracted by a phone, or even by their own passengers, the frequency of hard braking nearly doubles, says Stacy before revealing: “Braking frequency also increased by a fifth. Based on over 1.3Bn miles of driving data, Wunelli has established that drivers who are not on a mobile phone while driving, will typically hard brake once every 10 miles. If they are on a mobile phone this will increase to almost two times every 10 miles.” People are using their phone uncradled more too.

So the key challenge is to raise awareness by using UBI and telematics data in the right way in order to make a difference by changing driver behaviour. In his view this isn’t about just focusing on the young driver niches because it might also apply to more experienced drivers. In essence it’s about what he calls the telematics continuum, which identifies four different models:

1.       The captive model – consumers will only be offered a single product and the footprint won’t cover all market segments. Many won’t see a competitive quote and so this model is inefficient.

2.       The exclusive model – exclusive arrangement with OEMs. This restricts the number of OEMs that insurers can support.

3.       Non-exclusive model – done through a web platform to create one-to-many relationships but this model can be complicated to set up.

4.       Data exchange models – OEMs will feel a loss of control but it’s the most efficient and it will be favoured by consumes. By 2020 the data exchange will become the most popular model but all models will grow. The data exchange will solve the most problems for customers.

Stacy also claimed that UBI is too expensive for the mass market and, therefore, aftermarket solutions tend to dominate. However, retention is strong with UBI in spite of the cost of the data in UBI solutions being high. He explained: “Consumers aren’t going to invest in something they don’t understand. How do we solve this problem? We have decided to build a 12 volt tethered device to act as a USB charger. Everyone knows where the cigarette lighter. This device’s purpose is capture data at a low cost. This will be the last evolution before we take on connected car data.”

Different quantities at the same data quality. You don’t need 99% of data to get a person’s driving score. His company essentially wants to use its UBI device to give high resolution crash data because data quality is extremely important, and it varies for each type of phone. Subsequently Lexis Nexis is aiming for lower premiums without advocating that its UBI solution will be suitable for all automotive and insurance markets.

Motor insurance embraces connectivity

The discussion then moved on to a panel sessions with Edouard de Lamarzelle, CEO – PSA Insurance, PSA Peugeot Citroen; Valter Trevisani, group head of insurance and reinsurance, Generali; Josep Celaya, CIO, MAPFRE; and with Thomas Hallauer, research and marketing director, Ptolemus Consulting Group. The panellists discussed how the motor insurance industry is embracing connectivity.

We are not reaching the numbers we expect.

Lamarzelle said about why the industry is not reaching the numbers it expects to attain: “We have to consider the common factors – such as our shareholders. Usage-based insurance is strategic for us and the group has invested massively in the connected car. It’s a very strong trend because it enables many solutions.”

Celaya replied that there is a need to look at the big picture: “We are in the process of creating an ecosystem and the key player in the centre is going to be the manufacturer.” He added that UBI only works in certain market niches.

Trevisani said: “There will be fundamental trends in different markets. We are working on the value proposition to include complementary value solutions where the price benefit will be lower. Telematics is just the beginning. Customers are more connected in their cars and in their lives. We will launch a new generation of products based on the service component.”

The panel revealed that young drivers are more receptive to these kinds of insurance solutions because the cost of car ownership has traditionally often been prohibitive owing to the cost of insurance. Today drivers as young as 19 can now own a car and benefit from with free insurance. All they need to pay for with the schemes that offer this solution is their car’s fuel. The insurance remains free if they continue to drive carefully and responsibly.

The panel also discussed:

The need to integrate service into the development of UBI, such as roadside assistance and the panel believes that the services should be aimed at preventing accidents by offering what the Trevisani described as being detailed and compelling information.

When someone buys a car there’s no escaping the need to buy insurance but UBI may, in fact, not be mass market as an offering. However, UBI can be part of an insurer’s strategy in terms of keeping costs low.

He said the future is connected, claiming that all cars will eventually be connected and to capture this opportunity there is a need for the ecosystem players to develop strategic partnerships. The ecosystems will consist of mobile operators, car manufacturers and UBI solutions providers.

The ultimate aim is to re-invent the value chain to ultimately deliver insurance solutions, albeit that car manufacturers’ primary goal remains to sell cars.

Generali, for example, is “working actively on the partnership model to find the right economics for the car maker and the insurance company”. It is currently engaging in bilateral conversations, for example, with automotive manufacturers. With this in mind Celaya claimed that it’s not just about selling the car because the proposition is also about customer experience.

In essence this is going to initially be driven by the car manufacturers who will manage most of the data from each vehicle. There is, nevertheless, a need for solutions such as MyDrive Solutions to enable the ecosystem’s players to develop advanced behavioural analytics for the development of insight and behavioural scores. The scoring will assess driver behaviour, helping insurers to develop propositions based on measured and analysed driver competencies. MyDrive Solutions claims to be the leading driver profiling company for the benefit of insurance companies.

Lamarzelle, who has tested connected cars featuring autonomous safety functions, says he’s impressed by them but there is a paradox: “The paradox is that driving behaviour doesn’t change because the car is self-driven and convenient.” The group has ambition. PSA Peugeot Citroen sees it as an opportunity and claimed that it will have an impact on car ownership. Some insurance claims will reduce but not all of them. With self-driving vehicles, he claimed, there will be a strong need to increase the co-operation between manufacturers and insurers.

Insurer case study: strategic imperatives

After the panel session Dan Freedman, head of motor development, at Direct Line Group talked about the need to focus on device research and development. He claimed that the UK is making it work because it’s not just about motor insurance of pay as you drive. “Collaboration is becoming increasingly important for Direct Line Group and we are seeing more of a move to smartphone applications but this approach increases complexity because you have to think about the different devices and operating systems.” However, in spite of this complexity he believes that the opportunities are great and so there is a need to get right collaboration with car manufacturers.

Added benefits include Rescue Me and Alert Me – eCall services for example.

“Customers can use the same app for our OBD device too and they can activate it through the app,” he said. Direct Line’s approach also means that customers can interact between services and cross-device solutions. To encourage behavioural change and on-boarding the insurer offers a cashback service which rewards users for good driving. The scheme is aimed at the over 25s.

He concluded by adding that Direct Line has a relationship with Renault and so it will be starting to offer customers telematics-based insurance. For this reason the alignment of data is key as we evolve and this requires his company to be “flexible on device” because it wants to be able to analyse and integrate data while blending it into its core insurance products.

Aldo Monteforte, CEO of The Floow, added: “The data is used to generate services for end users, such as education because we believe in user safety, and we have developed frameworks for our partners to consider different options.” He explained that there is a high probability that risk exposure is very high when policies are over £1,000, and so this will support the professional instalment of a box.

Trends and forces shaping the auto industry

The trends and forces shaping the car manufacturing industry as likely to affect the insurance industry too.  One of the speakers offered the following insights that are worth noting:

• There is a threat implied to the industry, which offers an opportunity to design a new model.
• There is an opportunity to generate new insurance-grade scoring, enabling insurers to price scenarios according to manual and autonomous modes.
• There is an opportunity develop an insurable risk framework that will facilitate the adoption of new technology.
• The technology saves lives and we have evidence of that. That’s the only thing that really matters more than the speed at which the industry is advancing.

Interactive poll

An interactive poll of delegates also proved revelatory. For example, the audience was asked: “How do we convince consumers to share their data and what is the value?” 57% of the delegates said this can be achieved by offering valued added services, while 31% believe that it is about saving consumers money and even though there was much talk about safety at the conference only 11% said that was the key factor for persuading consumers to part with their personal driving performance data.

The Move from disruptor to enabler

Indro Mukerjee, CEO, Watchstone Group and Hubio, then looked at how the use of telematics can enable the technology to move from being a disruptor to an enabler. He therefore said: “As far the as the insurance executives are concerned, they are confused. Each conference has a different angle, a different slant. So we have to change our language to one of simplicity with a customer focus. Retailer companies engage with us periodically while insurance companies do so rarely. The break through comes in the business model rather than in the need to develop new technologies. We have seen an expansion of different distribution channels.

“The opportunity is to now have a different behavioural model. The insured becomes the consumer and you interact with them beyond just one occasion. The data set offers massive opportunities for insurers and customers. Data analytics can transform a conversation completely by looking at the speed at which you drive. We can interrogate them from a psychological point of view. We can now predict and act.”

He added that, with the battle of the black box, the mass market is going to go for the lowest cost centre, which will make hardware only one of the elements. In his view data science is the key because you can make correlated analytics to improve the data you’ve got.  He believes that the insurance sector needs a versatile toolkit because there have been too many failed markets where the technology exists, but the users don’t know how to use it. “You have to have an excellent data connection and a message gateway that’s accessible 24/7 to enable a seamless data transfer. Poor performance can lead to dramatic downstream consequences,” he said.

The discussion then moved to how insurers and their ecosystem partners can navigate cross vertical monetisation with the connected car with a presentation given by Pravar Gautam, vice-president sales for Asia and EMEA, Scope Technologies. This was followed by a Groupama presentation about The Interlinking Complexities of Connectedness for UBI.

Most interestingly, before everyone broke out of the morning session for lunch, Kenny Leitch, global telematics director at RSA, spoke about the autonomous vehicle GateWay project in London. RSA is the leading insurer for the project. He talked about the number of deaths and injuries caused by road accidents and why they are falling because of better driver education as well as driving tests, safer roads and because of the increasing use of technology to prevent accidents.

“Insurance is a growing business and we’ve benefited from this for many years but the average premiums are the same as they were 10 years ago,” he claimed. He thinks that the insurance industry is approaching a saturation point and that car manufacturers as well as insurers and other ecosystem partners now need to seriously consider what the problem is that driverless vehicles are trying to solve, highlighting statistics that show that 93% of road traffic accidents are caused by human error. So all of the instances of death and accident are avoidable especially because we are increasingly urbanised and cars are clogging up our roads. So new technology such as autonomous cars offers the potential for disruption.

The rest of the day featured presentations about re-examining the smartphone for UBI, a panel discussion about consumer convenience meeting motor insurance, how to re-build the insurance telematics business model, a look at claims fraud which is on the rise in the UK as well as a discussion about claims  and litigation.

The day concluded with a presentation about why a decrease in car ownership represents a threat to the industry and how it can also be an opportunity for insurers.

Revisiting the Gateway project, Iwan Parry, head of insurance at the Transport Research Laboratory (TRL) discussed why insurers should be prepared for change and new technology, how to assess the impact of autonomous car technology and how to identify where the key opportunities lie for insurance products in controlled environments to establish a niche market.