Seven Ways Automakers Can Capitalize on UBI

Connected cars offer automakers exciting new business opportunities that could expand their revenue 30% within a decade. Perhaps the biggest opportunity, as well as the biggest challenge for automakers, lies with telematics and usage-based insurance (UBI) services.

Insurers and automakers will need to work together to deliver new services that help their shared customers be safer drivers and save money.

The challenge stems from automakers and insurers being in different industries. Cross-industry solutions are difficult to execute when the partners do not fully understand each other’s businesses objectives. And automakers are understandably cautious in venturing into a heavily regulated insurance industry in which they may have to strike numerous integration deals with different insurance companies.

To that end, we’ve identified seven key areas that automakers and insurers should focus on in developing new data-driven revenue opportunities through UBI programs. These include:

·         The customer journey: Understand how UBI and connected-car features impact the entire customer experience with the car and automaker. The latest research indicates drivers want more control and customization of their connectivity features and welcome using that connectivity as a mechanism for collecting their UBI driving data. The ability to save consumers money by lowering their insurance premiums, which represent the third-highest cost in a vehicle’s total cost of ownership, and by delivering a positive customer experience from UBI reward offers throughout their vehicle ownership is a powerful incentive.

·         Data security: Seven out of 10 consumers cite privacy as their primary concern with UBI data. Thus, insurers and automakers must adhere to best practices around privacy and security, offering consumers transparency and convenience in how the data is used as well as how the automaker and insurer manage what information they share.

·         Data collection: Until connected cars make up the majority of the car parc, automakers and insurers will need to connect to and normalize data from many telematics data sources for new and used vehicles, applying the same score and UBI program across many different types of data-collection devices and methods. In the meantime, insurers are looking to institute device-agnostic telematics platforms for data collection. The good news: Automakers are bringing to market hardware-free telematics solutions that leverage the brand’s companion app as a way to capture and deliver driving data for fueling UBI programs as well as communicating driving safety information to car owners. Device agnosticism is critical to ensuring UBI program continuity regardless of future changes in technology.

·         Consumer benefits: Automakers and insurers will need to promote what customers value most: safety and savings. Drivers consider safety a top benefit of connected-car features, followed closely by the opportunity to save money. Safer driving can result in lower insurance rates through UBI. Half of new car buyers recognize the technology can help improve safety and expect lower car insurance premiums as a result. Promoting these features can drive both UBI adoption and vehicle sales.

·         Fragmented regulations: With regulations for tracking and storing raw driving data still in flux, automakers and insurers will need to stay on top of the rapidly changing regulatory policies surrounding connected cars, which vary across states, nations and legislative bodies.

·         Disruptors: Competition for UBI solutions won’t be isolated to just the automaker/insurer sphere. Expect to see Big Tech and other players jump into the already complicated ecosystem. Companies such as Google, Apple and Amazon are highly interested in plugging their platforms into the mobility space. But both the auto and insurance industries are highly complex.

·         Experienced partners: Due to the complexities of insurance data programs, selecting the right data management partner will help eliminate the need for multiple integrations with different insurance companies, better ensure data security and comply with rapidly evolving regulatory changes. Growth and innovations in telematics also will create larger and more diverse data sets, making it important to partner with someone adept at scaling quickly.

All these issues underscore the need for automakers and insurers to face the challenge of integrating the two industries quickly while also remaining focused on their respective top priorities. Collaboration between these two industries is key to delivering vehicle-embedded services that will benefit their shared customer and, as a result, foster greater revenue opportunities for automakers through UBI adoption.

Pavan Mathew is director of Auto OEM Business Development at LexisNexis Risk Solutions.