Siegfried Mortkowitz reports on the first day of Insurance Telematics Europe 2014, a two-day Telematics Update conference in London.
Telematics Update’s Insurance Telematics Europe 2014 conference opened on May 6 with the usage-based insurance (UBI) market in the same state as it has been for some time – growing steadily but still waiting to join the mainstream of automotive insurance.
“There’s a projection that the market is ripe with potential and ready to take off, but there are some limiting factors,” said Roosevelt C. Mosley, Jr., a principal and consulting actuary at Pinnacle Actuarial Resources. He added that many of these factors are service-related, based on what people in the United Kingdom have been saying about telematics insurance on Twitter.
According to Mosley, UBI “has the potential to be a game changer in terms of motor insurance.” “But we’re not going to get there until we listen closely to what the customer says,” he said.
UBI uptake drivers and barriers
Mosley said that the general tone of the conversation about UBI on Twitter tended to be “slightly more positive than negative,” but “the positives are much more significant with folks who are actually customers of UBI programs” than with people who are not using UBI. In other words, “everyone isn’t overly excited about UBI programs,” he said.
This was partly based on misconceptions about the product. For example, nearly two of three people complained that they could not get a quote or that UBI offered an uncompetitive premium. Mosley attributed this to the “crossover effect,” which he described as “things that will have a negative impact on the customer’s view of a UBI program that may have nothing to do with the UBI program itself.”
However, other complaints were spot-on. About one third of UBI customers complained on Twitter about shortcomings in the service, and these often had to do with the usability of website portals, he said.
Other important complaints were that customers felt they were not saving enough money, or they disagreed with the results of their driver assessment – two issues that are closely related and, ultimately, a lot harder to address.“There’s an issue with customer expectation versus the ultimate reality,” Mosley said. “That expectation could ultimately lead to a dissatisfied customer.”
The problem is how to convince a customer that he is not as great a driver as he thinks he is and so should not expect a big discount. “This is not an easy problem to overcome,” Mosley said.
On the positive side, “the happiest customers are those that are saving money,” he said. And research showed a direct correlation between customer satisfaction and the amount of money they were saving. This focus on saving money “is ultimately going to drive their interest in UBI,” Mosley said.
Another positive that Mosley flagged is service-related. “When people did get good service, they were happy about it and more likely to share that with folks,” he said.
What is added value?
Enriching the product with a range of value-added services is expected to help with mass-market adoption. “The whole notion of value-added services is critical to moving insurance forward,” said Ian Brown, managing director, Towergate Insurance – Motor Division, during a midday panel discussion on deriving value from telematics.
And the UBI market had reached a critical point in this regard, he added. “Where we are as an industry now is how we take it to the next step, how we grow it, how we get more of the mass market,” he said. “And that includes how if I’m a consumer saying, ‘Yup, I want telematics,’ what am I going to get from that apart from maybe a discount? A review of my premium or preferential rights on renewal if I drive well?”
But as Brown and his fellow panelist illustrated, insurers and other members of the UBI ecosystem are still at pains to define what that offering will be, how it will be delivered and what benefits it will ultimately deliver.
The idea of value-added services has been around for a while, Brown said, noting that some companies were already offering some of these services. He used the example of fleet telematics, which typically underpins a wide variety of services – from risk management to fuel savings.
Something similar may be used in the UBI space in the future, Brown suggested. “It’s how I, as a consumer, can manage my vehicle and get the best out of it.”
However, that may be easier said than done. Among other things, it is not at all clear at this point if value-added services will actually bring added revenues to insurers, or if that is even their purpose.
Brown had strong opinions on this issue. According to him, value doesn’t necessarily mean money. “If we derive too much value from value-added services, all we’re doing is making the customer pay more for that, and there is a danger you just won’t get the customers,” he said. “We have to be careful not to be too greedy with it.”
He cited his own company as an example of what he meant. “People stay with us because they’re happy with the product, even if they could get it cheaper elsewhere,” he said, echoing Mosley’s call to heed what the customer has to say.
Despite Brown’s admonition not to regard value-added services from a strictly monetary point of view, the question was raised – by panel moderator and Telematics Update managing director Precksha Saksena-Sood – if consumers would eventually be willing to pay for at least some services.
It depends on the service, said Vincent Pavero, director, products & innovation, iMetrik. For example,many parents would be willing to pay for a teen tracking feature, he said. “There are even people who ask for that.”
But then he asked if consumers would be willing to pay for a service like remote diagnostics. “It wouldn’t work,” he said. “This would be a service offered with when we buy the car. We wouldn’t have to pay, just like [we don’t have to pay for] the operating system of a computer.”
However, fellow panelist Jari Koskela, product manager at If P&C Insurance, noted that even a desirable value-added service such as teen tracking was not a long-term revenue source. “This is a good example of a service you would like to pay for just for a certain period,” he said. “But after three months, for example, you see they are driving very well. Would you then still pay for it?”
What’s more, Andrew Goldby, chief product officer at The Floow, was skeptical that people would be willing to pay for any value-added services connected with improving driver behavior, such as interactive training videos or online driver education. “Personally, I think it’s unlikely,” he said, adding that these services can still add value as product differentiators, for example.
The OEMs are coming
While a great deal of uncertainty still surrounds the imminence of UBI as a mainstream automotive insurance product, one thing is now certain: car OEMs have recognized the importance of insurance telematics and are beginning to move into the space.
While this is certainly good news for the UBI product as a whole, its effect on insurance companies is far from clear. “A number of key European OEMs are now including UBI solutions within their own offerings,” said conference chairman Nick Ford, senior consultant – automotive & transportation, Frost & Sullivan.
These include Renault, Volvo, Citroën, VW and Fiat.
According to Ford, there are a number of reasons OEMs are now getting involved in the UBI market. A native UBI solution helps them market and sell cars. It increases sales of in-vehicle infotainment systems if they are not included as standard equipment. It helps channel vehicles into OEM-owned or OEM-affiliated service stations if there’s an accident. And it improves customer retention.
Pascal Le Merle, manager, sales and marketing services, at French carmaker Renault, was on hand to explain his company’s venture into the UBI space. He said that Renault’s first embedded UBI solution was part of R-Link, a new multimedia in-car system launched last year.
(Renault’s projection is to have 200,000 R-Link-equipped cars on the road by the end of 2014, and 2.3 million by 2020.)
According to Le Merle, Renault is offering three partnership solutions to insurers via its R-Link UBI offering. The basic solution offers access to data and the ability to activate and de-activate the vehicle’s transmission of data remotely. “It means that we provide data to any insurance company that wants to use the data to provide insurance under its own brand,” he said. “This is strictly B2B.”
There is also a co-marketing partnership, which is the B2B model with shared marketing. And, finally, Renault is ready to provide telematics insurance under its own brand. Le Merle said that while this proprietary UBI product is ready, it has yet to be launched.
eCall is coming – soon
Many speakers on the first day of the conference agreed that regulation is an important agent in the proliferation of telematics in general and UBI in particular. “Regulation will definitely boost the uptake of UBI,” Frost & Sullivan’s Ford said. ”It will offer discounts to the insured, cost decreases for the insurer and data transfer across the insurers. There are a number of ways that it will help the market develop in an exponential way, instead of the linear way that it has been.”
In Italy, for example, the so-called Monti Decree, which mandates the offer of discountedthird-party liability insurance to all drivers agreeing toinstall telematics devices in their cars, has made that country the most active in Europe in insurance telematics. According to Ford, the United Kingdom is now considering a similar regulation.
This is where a pan-European mandate to ultimately have all cars on European roads equipped with an eCall system that automatically notifies emergency call centers in case of a crash could boost UBI adoption rates.
Marcel Visser, director of business development, automotive, Gemalto, said during the day’s final panel discussion that the much-delayed eCall initiative is now slated to become operative by October 2017. However, he said that it was still uncertain when new cars would be required to be fitted with a mandatory eCall box.
According to Jacques Amselem, CEO of Allianz Telematics, eCall means “mass adoption of telematics, it means saving lives, and it means big potential for increasing the quality of services and of overall quality of telematics in this area.”
Also important, eCall provided a very important opportunity for third parties, such as insurers. “It gives the possibility for insurance companies and other private service providers to deliver devices that have the pan-European eCall implemented inside,” he said. “This could help you add value to the services for your customers.”
Siegfried Mortkowitz is a regular contributor to Telematics Update.
For all the latest telematics trends, check out Data Business for Connected Vehicles Japan 2014 on May 14-15 in Tokyo, Telematics India and South Asia 2014 on May 28-29 in Bangalore, India, Insurance Telematics Canada 2014 on May 28-29 in Toronto, Telematics Update Awards 2014 on June 3 in Novi, Michigan, Telematics Detroit 2014 on June 4-5 in Novi, Michigan, Advanced Automotive Safety USA 2014 on July 8-9 in Novi, Michigan, Insurance Telematics USA 2014 on Sept. 3-4 in Chicago, Telematics Japan 2014 in October in Tokyo and Telematics Munich 2014 on Nov. 10-11 in Munich, Germany.
For exclusive telematics business analysis and insight, check out TU’s reports: Insurance Telematics Report 2014, Connected Fleet Report 2014, The Automotive HMI Report 2013 and Telematics Connectivity Strategies Report 2013.