Fueling the Future with Technology: Insurance of Smart Cars
Imagine yourself stuck at a highway after an accident and no-one is picking up your phone to help you in this emergency. But what if you don’t need anyone, rather just wait for some time, and a pickup truck and an ambulance arrives at the spot automatically? Sounds fascinating, isn’t it? And that’s the concept of insuring a smartly connected car.
We all know that a lot has changed since the first smart car was produced. More autos are becoming linked. Those linked autos are producing a large amount of data. Automobile manufacturers, insurers, and others are attempting to monetize this data in order to compete more effectively.
What is a connected car, and how is it connected?
Basically, a smart automobile is one that can connect to the internet via an in-car connection system. It has sophisticated features including internet connectivity, remote control of car systems, and improved security. There are a lot many ways of making a car smart, but the prominent ones are as under:
1. Cars that are connected with cellular modems when they roll off the assembly line: A cellular modem is a device that connects to a cellular network (e.g., Verizon or AT&T). Once linked, it can send and receive the same sorts of video, sound, pictures, software, and data as a modern mobile phone does through the cellular network.
2. Cars that are connected with a telematics control unit (TCU): Many OEMs have installed telematics control units (TCUs) in their vehicles in recent years. A TCU is a customized ECU that collects data comparable to that collected by telematics mobile applications. This information is generally communicated to the OEM, an insurer, or, eventually, a telematics data exchange via the vehicle’s cellular modem.
3. Cars that are connected with mobile apps from the OEM or an insurer: Recall alerts, basic roadside assistance, maintenance reminders, and vehicle health reports are all available. A top up will include driver feedback on how well the car is driven, collision notification (contact from a call center if sensors on the car detect an apparent collision), contacting emergency assistance on the driver’s request, find my car capability, notification of the car alarm being engaged, and geofence alerts.
4. Cars that are connected with a telematics mobile app: Telematics data represents how a vehicle is driven (rapid acceleration, hard braking, speed, times of day being driven, locations, and potentially other variables). When insurers originally launched telematics programmes, drivers had to put a small physical device (called a dongle) into the on-board diagnostics port (aka the OBD-II), which was normally positioned somewhere beneath the driver’s dashboard.
5. Cars that are connected with apps and digital assistants from Amazon, Google, and Apple: Amazon/Alexa provides the Echo Auto device3 and Alexa pre-installed in a wide range of car makes and models. Google’s Android Auto4 and Apple’s CarPlay are both intended to interact with a vehicle’s built-in display screen. The Siri Eyes Free5 app is available for iPhone users whose automobile does not have a CarPlay-compatible display (or no display at all).
6. Cars that are connected because they are software defined vehicles: Many OEMs are introducing the next stage in this shift. The software that defines (controls, maintains, and improves) a whole vehicle. The software will continually monitor important systems and notify OEMs, vehicle owners, and dealers of planned maintenance or potentially approaching faults. Software defined vehicles will get over the air (OTA) upgrades in the same way that mobile phone operating systems and applications receive regular updates with bug fixes and additions.
7. Commercial vehicle fleets that are connected with a variety of systems: Telematics systems can be installed in business fleet vehicles. These telematics systems effectively track the same driving behavior as private passenger telematics systems.
How insurers can be connected to the Smart Car and why?
There are compelling motivations for an OEM to get linked with a smart car. The primary ones include increased revenue from data monetization, upgrade packages for software defined cars, emergency services, predictive maintenance, decreased warranty expenditures, non-warranty repair control, a better recall procedure, and recall prevention. However, the main benefits will be entering the insurance market and packaging the entire product to the end consumer.
In general, OEMs can participate in insurance in two ways: distribution and risk-bearing. Distribution is the least expensive and risky technique. Among the distribution techniques include generating leads, acquiring a licenced agency, and making imbedded insurance offers to new or established owners. The second option for OEMs to engage in insurance is to own a risk-bearing organization, which is a more expensive and risky strategy.
There are several risk bearing alternatives including:
a) establishing an MGA that gets profitability dependent payments from an insurer,
b) using a fronting insurer,
c) establishing a captive insurer that transfers a major portion of its risk to reinsurers, and
d) owning a licenced admitted insurer that may also make extensive use of reinsurance.
Why should you be connected to the Smart Car?
Now that you know how you can be connected, but why one should be using this technology? The answer lies in the following advantages:
1. Better pricing and underwriting: Insurers generate this value by obtaining and analyzing traditional telematics data on telematics control devices and smartphone apps. The link between premiums and telematics scores (which indicate how a car is really driven) will be more natural to many prospects and policyholders than, say, the tie between rates and credit ratings.
2. Less claims leakage: In general, claims leaking happens when an insurer settles a claim for a sum greater than what is factual and fair. Data from linked automobiles may be used to limit leakage in a variety of ways. Recent AI-powered developments have reduced the time it takes from the time a car physical damage-only collision occurs to generating an accurate estimate for the cost of repairs.
3. Better claim process: Essentially, this is the claimant experience side of most of the previously outlined advantages from decreased claims leakage. When an accident happens, claimants will appreciate prompt, appropriate, and concerned replies from their insurance.
4. Connected emergency services: Some crashes will result in potential or actual injury to the insured’s vehicle’s occupants. The faster qualified medical first responders get at the scene of an accident, the sooner they may provide on-the-spot help and, if required, transfer wounded individuals to a trauma center.
5. Land and expand connected strategy: Almost all insurers that provide personal auto coverage also provide homeowner policies. Homes that are networked are becoming more frequent. An insurance can offer a homeowner with numerous sensors that detect smoke, leaks, intrusions, and track apparent losses in real time.
6. It’s cool to be connected: The final value proposition for OEMs also benefits insurers. As more new and older vehicles become linked, auto policyholders who want to be connected for the sake of being connected will gravitate toward insurers who can accommodate those demands.
Conclusion
Users of connected automobiles have access to a variety of services and perks. These have caused havoc in the car business. There will be an increasing number of smart automobiles in the country, and individuals are eager to get linked vehicles for themselves. Furthermore, one of the most important components of linked car technology is the increased security function. The sheer volume and complexity of connected vehicle data may appear overwhelming to those lacking strong cloud and advanced analytics capabilities in-house, but with the assistance of industry experts, expertise can be built and expanded over time, and insurance is one thing that has become mandatory for any vehicle owner to stay protected. Now the question is, are you one of the early adopters or going to be a laggard?
References:
· https://otonomo.io/use-cases/innovative-car-insurance-car-data/
· https://www.acko.com/car-guide/connected-cars-features-benefits/
· https://www.dig-in.com/opinion/how-connected-car-data-creates-insurance-personalization
