How Automakers and Insurers Will Deliver Great Customer Experience

To make the most of the opportunities that connected car technology presents, it is vital for both the automotive and insurance industries to gain a clear understanding of the possible points of convergence and collaborate effectively with customer centricity at the heart of their offerings.

On April 28, 2015, the European Parliament voted in favor of the eCall regulation, which requires all new cars in Europe to be equipped with eCall technology from April 2018. In the event of a serious accident, eCall automatically dials 112, which is Europe's single emergency number. It communicates the vehicle's exact location to emergency services, the time of incident, and the direction of travel (most importantly on motorways), even if the driver is unconscious or unable to make a phone call. An eCall can also be triggered manually by pushing a button in the car by, for example, a witness to a serious accident. The European Commission estimates that, once the system is fully implemented, eCall could save hundreds of lives every year by providing help to injured people more quickly.

We see eCall as an important project that will push the market and make automakers think how to best twist the cost burden of this mandatory regulation into an opportunity for additional revenues. With eCall facilitated in every car, the market will see higher public acceptance of connected car technology, which may in turn set the stage for higher adoption of telematics-enabled services.

The evolution of connected vehicle technology has been ongoing for more than a decade now. In recent years, however, the pace of innovation has accelerated, with most automakers around the world adopting the technology. They have been looking for opportunities to leverage connected car data for product and service innovation, and have also been creating data-driven profiles of their customers and vehicles in order to understand what customers need now and what they expect from vehicles in the future. Insights from these profiles will help automakers engage in relevant conversations with customers, introduce new services, and build new revenue streams. To enable best-in-class customer experiences, innovative automakers are actively participating in the emerging connected car ecosystem that is transforming the automotive industry into a sector that will have customer-centric mobility services at the heart of its strategies.

Autonomous cars will be the game changer in this transition. As autonomous vehicle technology is already moving from level 2 (partial automation) to level 3 (conditional automation), collaboration with different players in the ecosystem — such as insurers, other automakers, media companies, and telecommunications providers — will be vital to meet customer expectations and build long-lasting relationships.

Automakers and car insurers have stronger than ever talking points about how they can collaborate more directly, share data, and eventually go to market together with innovative services. With such a variety of new possibilities, car insurers are increasingly keen for more data on both drivers and cars in order to streamline prominent applications enabled by connected car technology such as usage-based insurance (UBI). UBI is a type of insurance that relies on real-world data such as individual and current driving behavior rather than actuarial studies of aggregated historical data to determine premium pricing. However, to charge premiums using pay-as-you-drive (PAYD) or pay-how-you-drive (PHYD) pricing models, the majority of car insurers still collect the relevant data using an external black box or a dongle connected to the automobile's OBD-II port.

BMW's recent launch of its BMW CarData service is probably the best example of how an automaker can deliver great customer experience. This unique service offering enables customers to view their BMW vehicle's key data whenever they want and share it with third parties, including car insurers. Customers have absolute control over which third parties they want to share the telematics data with in order to receive personalized services. The solution is powered by IBM's Bluemix cloud platform and Watson Internet of Things (IoT) technology. The level of complexity, security, transparency, and scalability that this model requires, as well as compliance considerations, makes it difficult for automakers to go it alone and highlights the significance of increased collaboration with other industries to extend the breadth of choices for customers, and to maximize service experiences.

The collaboration opportunities to monetize data to offer innovative products and services, the barriers to be addressed and current examples of the two industries working together are discussed in detail in our recent research titled Connected Cars: An Exciting Convergence Point for Insurers and Automakers to Monetize Data to Deliver Great Customer Experience. The report also provides guidance to the decision makers of both the industries to make the most of the opportunities that the technology presents.

By Martin Kuban, Lorenzo Veronesi, and Sabitha Majukumar


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