There's a new age of telematics dawning as auto manufacturers, technology companies and startups join insurance providers in the pursuit of connected-car data. Over the past year and a half, these players have entered partnerships aimed at ramping up engagement with car owners and monetizing data for insurance underwriting at an aggressive rate.
“Insurers thought they were the only players interested,” said Donald Light, director of Celent’s North America property/casualty practice. “But in 2016 tech companies said ‘wait, there is all this other data out there that we can get our hands on.'”
On one hand, more data for insurers eases the burden of aggregating it themselves through usage-based insurance apps, dongles and tech consortia. But it puts the onus on carriers to partner up quickly before competitors get a leg up on UBI data access, Light says.
The partnerships include BMW’s announced deal with IBM last week. They tend to be focused around providing data to carriers beyond acceleration, braking or total mileage per trip, which insurers predominantly collect now. Information depicting how often a person texts or talks on the phone using a vehicle’s operating system or even overall car performance is up for grabs for insurers, analysts said.
“We are offering our industrial clients like insurers a joint ideation and business modeling to identify compelling services and use cases,” said Stefan Schumacher, global director of connected vehicle & mobility solutions at IBM, adding that driver consent is always required before data can be shared.
As part of BMW’s deal with IBM, customers are allowed to download information gathered on them and pick and choose who sees it. Interested third parties undergo an application process to join the program and view encrypted data. The German automaker has made multiple deals around the connected-car of late, including entrance into a data consortium in October with Toyota, Allianz and insurtech Nauto.
"We recognize the industry is highly interested in utilizing data that is collected in connected vehicles,” said Rebecca Kiehne, BMW’s product & technology spokesperson. “We are addressing the need by providing an offering to third parties to obtain this data based on customer consent.”
That said insurers should forge multiple partnerships with auto companies, as specific vehicles tend to attract certain profiles of people, according to Strategy Meets Action principal Karen Pauli. The more partnerships an insurer creates, however, the more information carriers are forced to interpret.
“Say an insurer has 10 partnerships: Now they have to manage 10 different data streams,” said Pauli. “It’s big data to the 55th power.”
Like automakers, insurance technology companies with stake in the connected-car like LexisNexis, Verisk Analytics and startups Automatic Labs and Israel-based Otonomo want consumers’ permission to sell data through exchange platforms. But car manufacturers want to develop customer loyalty through concierge services as well.
“Frequent contact and services like teen tracking and automatic maintenance scheduling keeps a company top of mind for customers’ next vehicle,” Pauli said.
For insurers joining forces with aforementioned parties, this presents an opportunity to follow them into the future, according to Marik Brockman, VP of strategy & innovation at CSAA, a believer that the arrival of autonomous vehicles is fast-approaching.
“Within five years, a meaningful percentage of vehicles on the road will be driving for you,” he says. “I won’t care what type of driver you are because you’re not driving, the car is.”
Brockman acknowledged CSAA’s interest in collaborating with auto companies. But in the near term, the insurer is focused on building out its UBI offerings, now available in 19 states. He believes as OEMs—original equipment manufacturers—pick up the pace in distributing data to insurance companies, the more difficult it will be for carriers to sell UBI against competitors. As a result, car and tech businesses could become brokers themselves.
“They can say ‘hey, I actually know how you drive. Click here for some quotes. Does this save you money?’” Brockman said, adding that it’s important for insurance carriers to find their role as the auto industry shifts to driverless.
A potential need could be helping manufactures assess risk as they go through the different levels of autonomy, he says. Cybersecurity coverage for companies’ regular AI software updates is another possibility. And on the consumer side, individuals could opt to subscribe to driverless ridesharing services in lieu of owning a vehicle self-insured by the maker.
“Today you have today’s vehicle,” said Pauli. “But with autonomous cars coming, carrier relationships with automakers mean they keep up with and maybe influence their innovation.”