With several substantive obstacles to overcome, the market for usage-based automotive insurance (UBI) is likely to see many pilot projects in the near term, but relatively little market traction. Linking buyer and seller through connectivity and technology to create an informed, transparent market may seem straightforward, but the complexity involved is very high.
A significant and immediate obstacle is the uncertain intellectual property landscape with ongoing litigation among major industry brands. Until some agreement is reached, the players will lack a rational planning horizon, constraining growth.
Demonstrating the technological, commercial, and regulatory interdependence of UBI, the market requires jurisdictional clarity concerning which data elements may be captured and shared among the many brands of the connected vehicle ecosystem.
These obstacles are not new, and are existing components of the market conversation.
While the market sorts itself, it’s worth considering what a realistic use case might look like in 2015 and beyond.
One significant difference exists between the current experimental market and the one coming: equipment. Specifically, the current market experiments have customers both receiving and having installed equipment that integrates with the vehicle, captures data elements, and communicates with a service cloud.
In the coming years, automotive companies will integrate connectivity into their entire fleet.
Once connectivity is assumed in the vehicle, supplemental connected equipment will add zero value. Managing equipment procurement, inventory, distribution, installation and customer care are not desired competencies for an insurance provider. The logical conclusion is a connected product with multiple connected constituencies.
Integrating these ecosystem elements is required, though assumed here with explication.
What, then, is the customer experience? During the purchase of the vehicle, the salesperson directs the owner to a website for configuration and personalization of connected vehicle services. Stepping through the registration process, two insurance options are presented. The first option encourages the owner to Opt In to the anonymous driver program. With an incentive to reduce the $10.00 monthly connected vehicle subscription by 40 percent, the driving data will be anonymously contributed to a pool of real-time and historical driving data that creates greater market transparency. Further demonstrating market interdependence, this shared data resource is used for infrastructure investment considerations, product planning, and actuarial calculations.
The second option identifies the owner’s specific insurance carrier (from a list) and requests policy information. This data is then confirmed with the insurance carrier, and the owner subscription to an appropriate usage-based insurance (UBI) policy is configured. A customer profile informs an information policy that directs data capture and communication from a standardized set of vehicle and driver data elements relevant to that particular driver in that particular jurisdiction and that particular policy.
The consumer configuration requires less than 15 minutes – time that would have been spent waiting for purchase paperwork. In that short time, the owner has aligned a 5,000-mile per year vehicle usage with an uneven driving record to obtain highly personalized automotive insurance coverage.
From a market perspective, this creates a near-perfect alignment of buyer and seller within a transparent, informed market.
Leo McCloskey leads Airbiquity's marketing activities, bringing nearly two decades of experience in networked-services marketing to the company. His expertise in services and networks has been honed in North America, Europe and Japan. He has held senior leadership positions with many companies across his career, including MCI, EDS, Ebone and Terabeam (News - Alert). Mr. McCloskey holds a B.A. in Russian studies and language from Dickinson College.
Edited by Braden Becker