Connected Car Insurance Europe 2016, Day Two: Establishing business models, security and customer satisfaction

Read the recap of the first day here

The morning session began with a case study: Consumer Preferences For Connected Car Insurance. Matthew Green, key account director, Consumer Intelligence gave a very thought-provoking presentation where began by revealing that 62% of 18-24 year olds don’t like the idea of being watched by telematics insurance.

He cited research that found that the older you are, the less likely you will be offered a telematics policy in the first place while it’s often offered to younger drivers. In his view there is the potential for premiums to increase when customers aren’t driving safely. Subsequently, there are a few problems here in terms of getting telematics out to a wider audience. Premiums will get cheaper as they older. He exclaimed: “You want to use telematics as an insurer to manage risk better but telematics is creepy!” People will be reluctant to share their driving habits, their driving behavioural data – making on-boarding difficult.

The wider market

What can we do to get into a wider market? He asked before showing a video of Amazon Dash: “Let’s have a look at what Amazon Dash is! You walk around your house and point at what you want to buy and click it. The order arrives the next day; you don’t have to go to the supermarket. It makes life easier.” He argues this means that consumers have more time to spend with their kids or to play their guitar. Yet Amazon Dash is 100% about data, and Amazon Dash consumers are being watched. However, they are happy to share their data in the same way that Tesco Clubcard users have been for a number of years. As a result Tesco has so much data on people. He cites Facebook as another example. He said: “Don’t get me started on Google!”

Who owns the data?

Consumers would doubtlessly claim that they own the data, which is why they demand that they are asked by companies for consent to use it to make, like Tesco, personalised offers based on their data. In other words consumers don’t mind sharing their data so long as it is interesting for them.

Green then cites Hive, which householders can use to control heating and to monitor carbon monoxide emissions. As a result much data is shared; their energy provider knows whether they are in or out of their house. Yet he reveals that 93% of people in a survey said they would have it in their home. He also revealed that a survey of 6,000 consumers said they want companies to develop flexible and agile products. Research suggests that price is important but it isn’t everything. He asked: “Experience is, so what are you going to do to differentiate from your competitors? We are rapidly moving towards the dawn of autonomous vehicles and so the title of this presentation should be about whether the connected car can make life easier,” he argued.

For example there is Hum by telecoms provider Verizon – technology to make your car smarter. It is a telematics product. Hum alerts when you need a breakdown service. It is simple to install, there when you need it and not intrusive, it offers peace of mind while being about data. “The point is that I haven’t seen an advertisement in the UK from a consumer perspective. So what are the opportunities? If you think about insurance as a whole autonomous vehicles are going to revolutionise the industry. Telematics is an app or a Black Box. Much of [persuading adoption] is about communication.

A panel session then discussed The Evolving Ecosystem of Connected Car Insurance. It was kindly moderated by Niranjan Thiyagarajan, consultant at Frost and Sullivan. Joining him: Jacques Amselem, head of IoT, Allianz; Cyril Zeller, vice-president, strategic accounts, Scope Technologies; and Iain MacBeth, automotive and intelligent mobility, programme manager, Transport for London.

A key message from the panellists was: “The data needs to generate value and a level of transparency needs to be established too, but the data can be used against the customer and so it’s important to build trust with the brands.”

Colin Smithers, CEO of Redtail Telematics, then spoke about Re-Writing Your Business Ready for the Connected Car. He gave a very engaging presentation and some of the key points were:

  • My company is convinced that the best data will come from a hard wired device. There will continue to be a complete spectrum of device – including smartphones. Poorer GPS solutions lag during corners. They are never designed for the dynamic tracking of cars. They were designed for ships at sea, and this applies for smartphones. The GPS is never going to be that good. It wasn’t designed for it.
  • It’s shocking how effective telematics insurance systems are. It’s really important stuff. The airline industry monitors every landing to learn lessons. The data consists of events such as the start of the journey, events that occur during it, and its ending. Every car journey is scored within our device. For basic scoring we’re all familiar with speeding and harsh events and these are measured against a peer group. This considers count over distance above a locally derived threshold. Harsh braking is an example of a harsh event. Classic scoring includes a comprehensive data control panel to make it easy for consumers to understand it. Accelerometer data can show if someone is tailgating.
  • Insurers say we are going to have one accident in every ten years. Accidents often happen at road junctions when the traffic is busy. The data needs to be captured fast; otherwise it’s not possible to see the peak of what’s happening. Locked down legacy IT systems are the elephant in the room. Advanced scoring is about where you go. You could take a different route to work, for example.
  • Telematics can be used to assess risk and to assist pricing by behaviour. Telematics can be used to mitigate risk and to feedback the scores. Telematics can also help the claims room by immediate notification and by allowing early intervention and settlement through the assessment of fault of non-fault. It can also help to mitigate fraud.

Delegates were then offered a view of The Customer Mentality to Mobility by Roberto Polli, head of insurance telematics at Vodafone Automotive: “We care about mobility and working with insurers and telematics is therefore important.” He said it’s about M2M and connecting objects before claiming that Vodafone connects 35.5M devices from ATMs to POS machines while guaranteeing security, privacy and reliability. The firm, he says, also connect gas and water meters to encourage a better use of energy. He cited that health is an area that’s becoming increasingly important for the use of telematics too because it can be used to ensure that patients are being looked after properly.

“We currently manage a total of more than 700,000 connected vehicles with 1,500 new customers globally each day,” he claimed. He rightly said that this is a massive area of growth because mobility is not just about a person’s mobile phone. Therefore it’s important to think about what’s going to happen in the next 10 years. At the moment he finds that mobility is pretty strong but very much local. He cited car-sharing as an example, explaining that it is a big thing in Italy and to a lesser extent in the UK. Thanks to telematics he expects car-sharing to pick up in other countries too.

He added: “So we are seeing traffic lights are connected and buildings are too. We know that homes that are connected via security cameras, and there are road signs and cars. These are all part of a growing ecosystem. Having a connected society means there will be a change in how we consumer services. All of this is in the press every day, but we need to drive adoption to make sure that we can be more connected when it’s convenient.” One of the reasons why people won’t be driving their own cars in the future is because autonomy will make driving an activity of the past. So the argument is: “Why own a car that is just going to sit in your drive?” He could use his phone to call up a car that will then pick me up. So in his view mobility offers a wider freedom of choice, and you can access it “from everywhere at different comfort levels and also simplicity as well as sustainability.”

The question is: “How do we change the paradigm from protecting the vehicle to protecting the people by using telematics?” The answer is that there is a need to create new business models, a need to open new markets, and insurers and their ecosystem’s partners also need to engage with the mass market and with multiple drivers because the future will be about value added services:

  • Emergency,
  • Concierge,
  • Advanced analytics,
  • Customer rewards, etc.

He explained: “We need to make sure that we take of people whenever someone has an accident to act at that moment and to communicate with them during that event. If a vehicle is stolen we need to focus on the value of the person rather than on the car. If someone can protect my asset and do it well, then it’s something I will remember. Then the relationship will be continuous rather than just at the point of a claim event. Customers want to be sure that someone is helping them.”

So how do we do this? “We offer a personal premium to allow customers to pay for what they do”, he said. He believes that driver analytics are also important. But so is the need to reward drivers, offering e-call services, theft protection and crash management services. He therefore argues that value added services go beyond the call…”At Vodafone we offer 75 partner rewards, which allows us to understand customers’ lifestyles and private e-call offers very strong customer engagement, and there are very few programmes in Europe that leverage it”, he commented. The end game is to make customers buy more services from all of the ecosystem’s players – including insurers.

He concluded: “We want to switch from car insurance to care insurance. Telematics is not just about the cost because it’s a fantastic opportunity that requires creative thinking. Then there will be a shift from customer expectations based on price to provide a unique range of benefits and to deliver the services seamlessly when customers need them most.”

Cyber security, a risky business

Prof. Peter Lockhart, CTO of Roke Manor Research commented about the need for security: “We are going to talk about autonomy and security. Without security there is no trust.  We need to improve the accessibility to vehicles with the population getting older. Vehicles have to be connected. Why by an expensive asset when it spends 95% of its time on the drive doing nothing? [A look at machine situational awareness].  Self-driving cars will be targeted by hackers. Ransomware attacks are massive. The organisations behind them are crime as an industry.”

He also asked:

  • How do we assess risk and drive industry change?
  • What is the Euro NCAP rating?
  • How predictable are your cars’ reactions?
  • What is your cyber-security and physical security rating?

Nick Walker, marketing director, RAC then helped the delegates to look into the future of the connected car and telematics insurance with his presentation, The Future of Connected Car and Telematics.  He also claimed that the Royal Automobile Club (RAC) is knows more about vehicles, why they go wrong and we know more its customers – its members – than the vehicle manufacturers do. The RAC also acts as an insurance broker too with its own UBI offering.

The key point he made were as follows:

  • Telematics based insurance has been around for 15 years, and it has gained a 3-5% market share.
  • It enables a retention rate of 50% in year 2. 20% of insurance cancellations occur in the first 12 months.
  • The market is occupied by predominantly young drivers.
  • The RAC sees the challenges as cost – it costs to put telematics into a vehicle, then there is acceptance and technology.
  • The technology in a smart phone is similar to a telematics device, but it has a screen and it can be turned off. This makes it hard to measure driver score. So smartphones are useful but not reliable.
  • Customers need to be encouraged to adopt UBI by offering them rewards in return, such as money back or pizzas. However, you are masking the key problem.
  • By 2030 72% of cars will be connected. In 2020 84% of cars will be unconnected. So we have any years before connected cars become significant.

What would want from technology and for a connected car to do? He claimed that the acceptance of telematics insurance is there, and he finds that consumers are looking at technology in cars that could save them money. “People are interested in the condition of their vehicle: It’s an indicator as to why people would want any form of connectivity in their vehicles.”

The priorities are:

  • Connecting to the car – vehicle insight.
  • Connecting the journey – navigation
  • Connecting to the world – Information and entertainment.

He then commented: “We have several million vehicle insight records, including driver and collision data. With analytics we can become a much more proactive organisation. The call centre operators need to be able to advise drivers what to do with three key messages: keep going, pull over and wait at the side or drive to the nearest garage to repair the vehicle. If you can pick up the fault codes you can prevent the vehicle from being pulled off the road. We can remotely diagnose vehicles, organise recovery, etc. We are working with a range of services using telematics.”

He thinks that people are scared of UBI. In conclusion he suggests that industry needs to offer a wider range of service to gain more attraction. In spite of people’s reluctance to embrace use-based insurance the RAC has found that there is a huge appetite for connected cars. “The connection to the car and the journey is more important than connection to the outside world, and the connected car of tomorrow can be realised through telematics today”, he concluded.

Antoine Trarieux, director of connected services, Inter Mutuelles Assistance treated delegates to another case study about France’s experience of connected mobility and insurance. His presentation argued that success requires a vision but there will be some remaining questions that have yet to be answered because, while vehicle telematics has been around for a while, the connected car insurance market is relatively still immature. He also said that insurers need “smart data for smart use” in order meet customer needs. One remaining data question is: Collecting data to do with what?

During the afternoon there were other tracks that the delegates could pursue and one panel talked about The Autonomous Effect of Risk Calculation. Here are some of the key points that were raised by some of the panellists:

There is a need to define what a truly automated or self-driving car means. The motor insurance market is highly competitive. We need to concentrate on the benefits of what every system brings. In the short terms it’s great to talk about AEB to reduce accidents by 15-18% as this is a meaningful impact on road safety. The technology is being proven every day, but we don’t have enough data. So you price on vehicles. Aftermarket fitments are a problem and so pricing is not scientific yet.

Caroline Coates, partner and head of automotive at DWF LLP, commented: “There is a lot of work to do in terms of vehicle standards. I don’t think I can tell you that there is a cohesive regulatory programme but it is likely to come in relatively piecemeal. The Road Traffic Act provides a reasonable framework for vehicles to work with autonomy, but we will have to see how this plays out. ADAS must comply with the vehicle standards in force. The question is what will become mandatory and what won’t – such as AEB. It will be interesting to how it is enforced or not.”

Matteo Carbone, principal at Bain and Company then spoke about his Observations of the Connected Car Industry.  Carbone offered a view of the Italian market. In Italy a large part of the market is managed by agents. It has been found that savings of more than 10% are achieved by controlling the value chain. So telematics offers a positive impact on the bottom line, and there is an intermediary commitment while outsourcing can lead to some quick wins with limited investment. With outsourcing you need to pay the telematics provider. The Italian experience shows that there is a concentration on delivering benefits on the insurance bottom line. It also seeks to establish a higher frequency of interaction with insurance customers, which will make the customer more satisfied. This is part of the business case for telematics, and so it offers good economic value for the insurer.

Telematics data leads to knowledge created through data interpretation. Insurance groups aren’t aiming the way they approach telematics. Yet they are asking for contextual data to combine it with their own claims data. The data chain is not clear, but it involves GPS data from the car, contextual data, raw data interpretation and this creates insurance knowledge, new risk models and insurance products. In Italy there are 26 insurers with a telematics offer. Pay-as-you drive is becoming an important part of the market and so it is evolving. They are now looking for risk-based pricing. The aim is to retain the less risky client and to influence customer behaviour. Therefore the risk is on offering renewals to low risk customers in order to retain profitability of the motor insurance telematics portfolio. Value can be kept with used cases based on rewards and a range of services.

The telematics technology is far from maturity. Italy is in the learning phase while the UK, the US, Spain and Canada are in an exploration phase – behind Italy. What’s clear is that a lack o clear strategy can limit the achievement of the full potential of telematics. A clear strategy has 5 parts to it: risk selection, risk-based pricing, value-added services, loss control, loyalty and behaviour modification. In fact strategy should come first because insurers need to consider why they wish to introduce telematics – connected insurance. They also need to consider how to position the product within the current product offering in relation to the target client. The strategy needs to consider the value proposition to define the customer experience and the loyalty systems. Finally, there needs to be some consideration about the kind of hardware that is to be used and about the operating model. Think about how you like to leverage the knowledge you are creating.

The day closed with a panel session with Move_UK, and in another track delegates heard about The Evolution of UBI Across Europe.

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