Insurance Telematics USA 2012 – Day Two Wrap

In just two years, Insurance Telematics USA has grown from a handful of vendors to a thriving show that was double in size from last year’s. Attendees and exhibitors, some of whom have been working in this space for 10 years, were a bit breathless with the feeling that the tipping point might be here.

Two trends emerged: First, the ecosystem has become robust, with a wide variety of vendors running the gamut from chips and hardware through platforms and services to software development. Several attendees noted a new level of openness and collaboration among companies. The industry seems to have gotten the message that Ari Silkey, vice president of GreenLight Connectivity Solutions, delivered in his talk: “When a market is developing, competition actually accelerates the market.”

Second, data is on everyone’s minds: How much data is enough for a UBI system? What’s the most valuable data? Can data be shared? While some insurers consider their stores of driving data to be a proprietary, competitive advantage, there’s buzz about data aggregators playing a role in UBI.

Marcia Berner, director of implementation services for the Association for Cooperative Operations Research and Development (ACORD) said her non-profit is working to create standards for the collection of insurance telematics data. Such a standard could have benefits for all the companies in the UBI ecosystem, according to Dean Collins, head of business intelligence for Travelers Insurance. For example, insurers and fleet operators would have greater device choice, while auto makers could have more flexibility.

While some speakers kept their cards close to their chests, others were frank about their capabilities and business plans. For example, Octo Telematics shared a case study of a real, though unnamed, customer’s ROI.

One ghostly presence hovered over the conference hall: Progressive Insurance, with its portfolio of patents that it claims covers the basic business processes of UBI. Day Two kicked off with a strongly attended panel on IP, Litigation and Privacy Issues. When Strategy Analytics analyst John Canali, moderator of the panel, asked if anyone from Progressive was in attendance, there was silence.

Michael Stolarski, a member of Dykema Gossett PLLC, noted that 97 percent of patent infringement cases settle before the parties go to trial. He believes that, if Progressive does settle its lawsuits and license its patents, the court might determine royalties reasonable enough that even smaller insurers would be able to move forward with UBI schemes.

Jin-Suk Park, a partner in the law firm of Akin Gump Straus Hauer & Feld LLP, wasn’t so sure about that. Park warned that the patent world is becoming more fluid and patents are being sold on the open market. Now that a car is a moving computer, patents from consumer electronics will be asserted against vehicles as well. He also said that a good intellectual property strategy is “mutually assured destruction.” If both companies have a solid patent portfolio, it would be to expensive to litigate, allowing the companies to compete on business instead.

Telematics hardware was amply represented among the exhibitors, with many attendees hoping that dropping prices will speed adoption. Blair Currie, vice president of marketing at IMS, said he’d heard prices for UBI dongles as low as $40 — with the caveat that a cheap box could come with an expensive service plan. He said that IMS is in discussion with a number of customers and prospects about the delivery of a base-model device priced at around $75 for reasonable quantities for delivery at the end of Q1 2013.

Cost-cutting is generally seen as the key to adoption by insurance companies — who will then cut prices for their best-driving customers. A question considered by many speakers was, if insurance companies have to pay suppliers and TSPs for UBI and then cut prices to their end users … where’s the money going to come from?

Answers floated: Insurers will save money through business efficiencies, faster and more accurate claims processing and improved customer relationships. They — and possibly other entities — will be able to charge for value-added consumer services. And insurers will be able to segment customers, offering a variety of products better tailored to their needs and desires. For a large subset of consumers, it’s thought — hoped — that value-added services will do more to retain customers than price cuts.

John Kramer, product manager for Nationwide Insurance, said, “We’re creating a customer for life by offering them the product. The key to success is limiting the spend and finding the sweet spot without taking too hard a hit.”

For a discussion of topics raised on day one, see Looking toward UBI 2.0. For some quick insights into Insurance Telematics USA 2012, follow its Twitter feed at #TUINS.