Henry Kowal, director of product management at Arity, shared responses to questions related to automakers expanding into insurance and data sharing.
How might automaker-backed insurance programs impact traditional insurance distribution models?
Honda's launch of its own insurance agency, following Tesla's similar move, reflects how original equipment manufacturers (OEMs) are expanding their role in the broader insurance ecosystem. These developments signal a growing trend toward aligning insurance offerings more closely with vehicle ownership. These types of embedded auto insurance offerings are still very much in the early stages, but could eventually challenge traditional insurance distribution channels and policyholder relationships, offering more competitive premiums based on actual driving data and lower customer acquisition costs.
At the same time, it affords traditional carriers with partnership opportunities to co-brand offerings with OEMs or become the underwriter of the risk. Generally, increased competition bodes well for customers. Therefore, whether through OEM-led programs or traditional carriers, customers can benefit from the delivery of more seamless and personalized experiences that meet their evolving expectations.
What does consumer sentiment tell us about comfort with data sharing in the context of insurance pricing?
With explicit consumer consent, driving behavior data has the opportunity to enable more accurate risk assessment for drivers, and in turn, it allows carriers to offer fairer and more equitable pricing – and potentially offer lower costs for safer drivers.
Consumer sentiment on connected car data is evolving. According to Arity's 2024 consumer survey, 43% of drivers report being "very or extremely comfortable" sharing driving behavior data with insurers to qualify for discounts, an increase from 36% in 2023.
This reflects both growing curiosity and lingering concerns. Some drivers still worry that sharing their driving data could lead to penalties – a perception often fueled by broader conversations around data privacy and a misunderstanding of how the data is used. In reality, connected vehicle data allows for more accurate risk assessment, which leads to fairer, more personalized pricing. When drivers understand that behavior-based pricing gives them more control and rewards safer driving, skepticism tends to decline. Typically, when presented with different variables on which customers can be priced, individuals tend to lean towards factors in their control, such as how they drive, versus factors that they have little control over, such as their age, gender, and other demographic characteristics.
OEM-led insurance programs, powered by telematics, have an opportunity to shift perceptions by delivering on the benefits consumers value most: lower premiums, greater transparency, and a sense of control over their costs. As more consumers experience these benefits firsthand, we expect comfort levels to continue rising.
How might OEM insurance offerings influence competition between automakers and established carriers?
The release of new OEM-backed insurance policies from Honda and Tesla has helped reignite the industry's push toward using personalized, behavior-based pricing models instead of traditional pricing strategies anchored on proxies of risk, like demographic or location details. This competition benefits customers in terms of fairer and equitable pricing, and potentially rewards safer drivers with lower rates for auto insurance.
With access to in-vehicle data, automakers can offer incredibly tailored policies to new car buyers at the dealership. This integration gives OEMs an edge, especially among consumers who value convenience and embedded services. This can also include value-added services in policies and supported by connected car data, such as vehicle health and predictive maintenance, as well as safety, crash detection, and emergency response services.
The emergence of more OEM-led insurance programs also creates new partnership opportunities for established carriers. Traditional insurers and OEMs can collaborate in the development of products or share telematics data to enhance underwriting and the customer experience across the board.
What role could trust play in the adoption of OEM-provided insurance programs?
Trust remains a critical factor in insurance decision-making. Arity's 2024 consumer survey found that 44% of drivers cite "trust in the company" as a top reason for choosing their insurer, and that's a seven percentage point increase since 2023.
For OEMs new to the insurance space, brand reputation can be a double-edged sword: a trusted automaker brand could bring credibility to their new insurance offering, while their newness to insurance offerings could introduce consumer skepticism. Transparency around customer data usage and tangible value (such as lower premiums or a seamless claims experience) is critical to building and sustaining trust in new OEM insurance programs.
How might behavior-based insurance programs evolve as OEM insurance models gain traction?
Behavior-based insurance, once considered a niche pricing strategy, is now a mainstream offering among many major auto insurers. While it hasn't fully displaced traditional underwriting factors, its adoption is accelerating – particularly as states like Illinois push for policies that limit reliance on traditional factors like credit scores or ZIP codes to make pricing fairer.
Now, as more OEMs embed telematics and data-capturing capabilities directly into vehicles, the line between mobility intelligence and insurance may continue to blur.
As these offerings scale, we can expect more dynamic pricing models, real-time coaching, and incentive structures that reward consistent, safe driving over time. In addition, pricing models can use more sophisticated inputs such as advanced driver assistance systems (ADAS) available in vehicles to provide even more granular, contextualized risk insights. Finally, vehicle data can be combined with mobility data, such as phone distraction, for a more holistic understanding of vehicle and driving risk to augment underwriting. Rather than viewing this trend as a threat, traditional insurers have an opportunity to collaborate with OEMs to develop innovative protection policies with value-added services or adopt similar mobility data strategies to remain competitive.
In an increasingly connected ecosystem, the winners will be those that deliver tailored coverage, leverage driving, vehicle, and mobility data for personalized pricing, and create a seamless customer experience with new services to promote customer loyalty.
