Insurance Telematics Europe 2015 – Day One Blog

Although insurance telematics continues to increase market share and find growing consumer acceptance, its status has not changed significantly over several years. This was described in clear and certain terms by Aldo Monteforte, CEO & Founder of The Floow: “The killer device has not been found yet and insurance telematics is still in its infancy.”

The protracted childhood of insurance telematics has many players in the ecosystem scratching their heads and still wondering what will be the “killer app” to take the product into the maturity of mass market acceptance. Or, as Jonathan Hewett, CMO at Octo Telematics put it: “Where’s the friction point? Why can’t we make a compelling business case to expand outside the young driver market?”

He provided a general answer, saying that insurance telematics was not a “one size fits all” proposition and services should be tailored to other market segments beside the young, such as drivers of high-end cars and families. The key is, Hewett said, “applying services in such a way that they make life simpler, easier and cheaper for the end consumer. This is the direction to travel.”

Josep Celaya, chief innovation officer at MAPFRE, agreed and brought up an issue that was repeated by many speakers throughout the day, as it had been cited time and again at previous insurance telematics conferences. “Are we honestly able to deliver more value, I mean the kind of value that the customer would be willing to pay for with existing solutions?” he asked. “For me, this is one of the biggest questions.”

And he immediately answered it himself. “To be honest, the customer experience has a lot of room for improvement,” he judged. “We could do much better.”

For Celaya, the key to better customer service and insurance telematics market growth is the car manufacturer. “The only way to make it mainstream is for the manufacturers to embed the solution in their cars,” he said during a “super-panel” discussion on—in the words of moderator Frederic Bruneteau, managing director, Ptolemus Consulting—“how to bring telematics to a bigger public.”

In a presentation that opened the conference and preceded the panel discussion, Celaya maintained that the car industry was undergoing a structural change, from a value chain to an ecosystem. This is occurring, he explained, in the same way ecosystems were built up around mobile phones and computers in the recent past.

An ecosystem, Celaya said, should have certain features, such as “a value proposition around a core product, and around that core product there are certain applications that can be delivered to the customer.” There also has to be a win-win business model, “so that everyone can make a profit.”

The OEMs will be in the center of this ecosystem, Celaya said, and as a result an insurer should play a completely different role in the future. “We are talking about risk management of the car. We are not talking any more about insurance. We are talking about helping a customer and a manufacturer manage the risk in a car.”

He said this is done by ensuring that certain key services are delivered to the car, such as maintenance. “Understanding that the car is properly maintained is of interest to an insurer, especially when it comes to estimating the risk of a certain car,” Celaya said. Other such services include integrating claims management with the intelligence of the vehicle and pricing that includes these and other car risk management features.

Matthew Thomas, strategy and planning director, Ageas, proposed a very different solution to the market penetration question. “One of the reasons telematics is not mainstream in the U.K. market is that we haven’t able to answer the question sufficiently of what is the value of having insurance telematics for the customer,” he said. “The challenge is, how do you create value in the insurance industry?”

Thomas then charged that “where we have been successful in introducing telematics to customers, we’ve locked them into a behavior that is almost counter-intuitive for them.”

He went on to explain that about half of U.K. auto insurance customers change insurers every year. “But if you’ve had a box fitted by your telematics provider and you want to switch, you actually can’t take the benefit of the driving behavior you’ve created with you,” he said. As a result, the high driving score the customer has built up over a year must be “left in the box” if he or she wants to change insurers.

U.K. customers are wedded to shopping around, because the insurance market has been telling them to do it for decades, Thomas said. “If you can build a proposition where the customer sees a value in the data they have created with you through their driving behavior, that will drive the customer’s decision-making. We have to have a conversation in the U.K. about how we can make driver behavior more portable between insuraners, rather than locking the customer into one insurance solution. The industry has to talk about data portability.”

In fact, the industry did talk about data portability on the first day of the conference, in an afternoon panel discussion, titled “Whose Data? My Data—The Portability Debate.” This discussion provided perhaps the most discouraging words of the day—perhaps even of the year—for the insurance telematics space, and they were uttered by Puneet Bharal, director, Global Development, at Acord.

He was responding to a question by panel moderator Andrew Yeoman, CEO, Concirrus, about when data portability would become an important issue, especially in the light of data showing that market penetration in the U.K. among young drivers was 18 percent but only 4 percent in the general public. Bharal replied, rather sheepishly, “I don’t think telematics will ever be anything other but a niche offering. That’s not to say that it’s not a viable business model. I believe telematics is a niche product that appeals to young drivers and fleet managers, and I think the rest of the market doesn’t understand the business proposition at all. By the time it will become a mass market offering, there will probably be driverless cars anyway, which changes the market completely.”

The panel discussion continued nevertheless, with Bruce McKee, FS industry lead at Microsoft, providing his own assessment of the current status of data ownership. “From my perspective, insurers feel that they own the data,” he said. “If I were a consumer, I would feel that it was my data and if I want to take my [driver] data to another insurer I should be able to. My sense is that it’s a bit of a gray area, and the industry needs to figure out who owns what and see what you’re going to do with it, or you’ll open yourself up to lots of unnecessary regulatory oversight.”

Another panelist, David Hughes, associate at Barnett Waddington, had a far more dour view. “At the moment, it feels like the technology companies own the really detailed data on driver behavior, insurers own the claims data and some driver behavior, and the consumer owns nothing.”

Bharal described the current data situation as “a kind of Wild West,” with smartphone users who download an application agreeing to the terms and conditions of the manufacturer without knowing that they are giving ownership of their personal data to the app provider.

Regarding insurance data, he said, “If you want to move your data from one insurance carrier to another insurance carrier, I find it impossible to believe that any regulator will not allow that. So I don’t think insurance companies should be feeling that once they get hold of this data they can put these barriers around it and not share it.”

Making data portable makes good business sense, he said. “As an insurance company you’re always interested in getting new customers. So, while you might not want your customers to leave, you do want to make it easier for customers to move to you. I believe there will be a point where you have to make it possible for companies to share telematics data.”

That point, said Hughes, will be reached “when consumers start being frustrated” by their inability to take their driver behavior data to another insurer. He suggested that, rather than transporting the raw driver behavior data, consumers will be able to take a driver rating with them, and this scenario may come to the space in three to five years.

“Eventually, portability will involve a risk score like a credit score that you can take with you to an insurer,” he predicted.

Bharal agreed, and suggested the creation of something like a risk clearinghouse, consisting of a trusted third party, that will create a risk rating based on the driver data.

Microsoft’s McKee noted that a simple score will probably not be an accurate enough indicator. “There has to be some scenario when you want up-to-date granular data,” he said. “It has to be a third party that handles the data, breaks it down into a standard format and keeps the granular data behind it to back it up.”

The first conference day ended with a panel discussion on the potential effects of the growing use of Advanced Driver Assistance Systems (ADAS) on premium pricing—although the real subject turned out to be the advent of the driverless car. To begin, panel moderator Nick Ford, senior consultant at Frost & Sullivan, cited data showing that emergency brake assist systems (EBA) were reducing accidents by up to 20 percent.

According to Andrew Miller, CTO at Thatcham and president of the European New Car Assessment Programme (Euro NCAP), the U.K insurance industry has been risk-rating systems in traditional underwriting terms since 2013, and according to the rating system if you are driving a car with an EBA system, you would be eligible for a premium discount of about 10 percent, depending on how you drive. “That’s something to look out for when you’re looking for your next [car] purchase,” he advised. He noted that Germany has a similar system and suggested that risk-rating will have to take the ADAS solutions into greater account in the future.

But, as Acord’s Bharal noted in the preceding discussion, the entire insurance game will be changed when all these systems and the accompanying suites of sensors work together on a vehicle to make it truly autonomous.

Tim Marlow, programme director at Ageas, said that a fully autonomous car changes the liability equation. “The user—not the driver; there is no driver—will not be liable for an accident since he has no input in the process,” he explained. “He may not even own that vehicle. The vehicle may simply be rented for the journey he wants to make.”

Marlow suggested that instead of car insurance, the occupant(s) of the driverless car may just be covered by something similar to travel insurance. “Accident liability will lie with the [vehicle] manufacturers and their suppliers,” he said. “Or, potentially, with another road user who’s not driving an autonomous vehicle and has crashed into you.”

Asked by a member of the audience to put a timeframe on this scenario, Miller said that Level 4 car autonomy, where the vehicle has control of the driving for extended periods and in specific use cases is only five to ten years away. “And [it will be] thirty years for the whole fleet [to be autonomous].”

 


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