Here’s a thought experiment.
Imagine that you manufacture some things – let’s call them automobiles. And imagine that in those automobiles you’ve installed bunches of computer systems to control steering, braking, transmission, engine performance, and even record GPS-determined locations. Let’s call these computer systems electronic control units (ECUs). And imagine that these ECUs generate streams of data that are potentially highly valuable to organizations that are interested in how safely a given automobile is being operated. Let’s call these organizations insurance companies.
And imagine that one day, a really smart person at an insurance company had the great idea that if they could capture and analyze these streams of data, they could understand automobile risks in a way that would let them price and underwrite auto insurance in a much more accurate and profitable way. Let’s call that person Flo.
And let’s say that Flo realized that the automobile manufacturers had kindly provided a little port thingy that allows her to access all this valuable and data and transmit it to her insurance company without paying the automobile manufacturers a single penny! Let’s call these port thingys OBD-IIs.
And let’s say that Flo and her counterparts at lot of other auto insurance companies go a little crazy giving their policyholders little whats-its that plug into the OBD-II thingys. Let’s call the whats-its dongles.
But the really great thing is that the automobile manufacturers are still not charging Flo and her peers a single penny.
And let’s say that the automobile manufacturers, one day decide that this internet mobility thing is here to stay, and that it could be a really great way to deliver more value, and deepen their relationships with the people who buy their cars. And to do all this stuff, the automobile manufacturers are going to make cars that connect to the internet! Let’s call these kinds of cars, connected cars.
And lastly someone at an automobile manufacturer says, “Oh Dear Dearborn” or “Oh Cool Cupertino” “We could make a bundle of cash by taking a big slice out of the increased profit margin that Flo and her friends have created by charging them very large fees to get access to the ECU data. Or better yet, we could hire some actuaries and data scientists and enter (or re-enter) into the auto insurance business ourselves—and Flo can go make a big bet on smartphone-based telematics.”
Ok, so here’s the thought experiment. If your were an investor, named Warren, looking for a growth stock, would you invest in an auto insurance company?
This blog entry has been republished with permission from Celent.
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The opinions posted in this blog do not necessarily reflect those of Insurance Networking News or SourceMedia.
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