General Insurance Article - The car is becoming the star

Since motor insurance has existed, insurance providers have calculated a consumer’s risk using combinations of location, claim history, gender, age, occupation, distance driven and other rating factors that have been a proxy for risk. Telematics transformed how risk could be understood, but usage-based motor insurance (UBI) has largely remained a niche proposition targeted to young drivers.

 By Martyn Mathews, Sr. Director, Personal Lines, LexisNexis Risk Solutions
 This has been due to a variety of factors, not least the operational costs involved which means that aside from a few exceptions, telematics has only really been viable for customers paying the highest premiums.

 However, today we are witnessing a rapid increase in vehicle connectivity, as well as advancements in vehicle safety technology and autonomous driving.

 The car’s becoming the star
 This is opening the potential for dynamic data from the car and static data about the car’s build to be used for insurance risk assessment. In short, the car is becoming the star in helping the insurance sector deliver cover more precisely correlated with risk.

 Fundamentally, connected car data won’t just be for the young driver, but for all consumer segments.
 100% of cars will be connected by 2030

 All cars are expected to have connectivity by 2030 , feeding a wide range of data into car manufacturers who want to leverage this data to better serve their customers and to support their goals of zero emissions and zero fatalities. This includes offering UBI based on how the car is driven as well as the presence and activation of increasingly advanced in-car safety features, otherwise known as Advanced Driver Assistance Systems (ADAS).

 In the UK, 78.1% of new cars on sale are offered with a self-activating safety system and 1.8 million buyers a year are able to benefit from collision avoidance technology.

 At the same time, the insurance sector has become acutely aware of the need to access connected car data and vehicle build data to remain relevant in a world where consumer experience will trump products. It will create new opportunities for risk modelling and new ways to deliver value-added services to consumers.

 We have estimated the value of connected car data to the insurance market is $5bn.

 Bringing insurers and car manufacturers together
 Significant steps have already been taken to bring the insurance and car manufacturing markets together. The formation of a connected car data platform and exchange with consumer consent, compliance and control at its heart is providing a solution to help both markets leverage connected car data.

 This enables driving data from motor manufacturers and insurers to be brought together in one data exchange in a fully compliant manner, normalised, contextualised, standardised. It can then be delivered back as an actuarial grade driving score for UBI, regardless of the vehicle make, model or device type.

 But with connected car data still on its upward trajectory, we also need to look at what’s deliverable to the market right now.

 Starting with clean and accurate vehicle-based data, it’s already possible to convert the Vehicle Registration to VIN to build a solid data foundation.

 ADAS data first
 Static data on the build of the vehicle, including its ADAS features, is already well-advanced for use in pricing with testing underway with a number of UK motor insurance providers. This has been the priority given the majority of new cars come equipped with ADAS.

 Embedded telematics
 Building on these foundations, using the car manufacturer’s embedded telematics, usage-based insurance programs and driver behaviour scoring can be delivered. It will also become possible to deliver distance readings directly from the odometer, ending the need for estimations, forecasts, and the potential for error.

 In addition, data from the car will support pay-how-you-drive options, where insurers can launch mass-market driver scoring and safety programs.

 A single integration
 Soon, from a single integration that they already use for more traditional data, insurance providers will be able to access a suite of vehicle data products and multiple car manufacturers’ data, to enable point-of-use delivery across the insurance value chain.

 These developments are happening as consumer appetite for services based on vehicle data is growing.

 Consumer acceptance and appetite grows
 Research demonstrates, most consumers (80 percent) are between “somewhat” and “very willing” to share their data in return for a range of benefits, including lower prices, more relevant, personalised offers and alerts, and quicker claims processing.

 Clearly the insurance providers already offering telematics will be in a stronger position to tap into this consumer demand and leverage the data to come from the connected car than those who have yet to get on board.

 Connected car data is set to disrupt the market, but only for those who are least prepared.


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