The integration of telematics technology is the latest revolution for the automotive insurance industry. The concept of telematics is a portmanteau of telecommunications – long-distance communications – and informatics – the science of information.
Telematics refers to the collection of information related to remote objects such as vehicles via telecommunications networks. Telematics enables usage-based insurance (UBI) in the auto insurance market.
Berg Insight has surveyed the car OEMs’ activities within insurance telematics as part of its IoT research programs focused on the automotive sector. The involvement of the automakers in terms of telematics-enabled insurance offerings for consumers has started to increase from a low level.
“While insurance telematics applications have previously been powered by aftermarket telematics players in most cases, there is now increasing interest from automotive manufacturers driven by the general trend of connected cars which will make the prerequisite hardware for insurance telematics ubiquitous”, said Rickard Andersson, Principal Analyst, Berg Insight.
The cost structure on many insurance markets makes it impossible to motivate the retrofitting of telematics hardware from an ROI perspective. “This hurdle is now removed as the necessary hardware infrastructure is broadly available as standard on new cars”, concluded Andersson.
Market size
Berg Insight estimates the addressable market for insurance telematics at 299 million vehicles in Europe and 286 million in the US in 2017. Anyone looking to own a vehicle must add insurance as a recurring cost to the privilege. In 2017, auto insurance premiums reached € 132.3 billion while North Americans paid US$231 billion.
Insurance telematics projects
Many of these insurance telematics projects can be found in North America.
General Motors’ OnStar subscribers can since 2016 sign up for Smart Driver, a driver feedback program where the participants after a three-month period receive feedback on their driving behaviour. They can then choose to receive quotes from participating insurers. OnStar data is used by several leading insurers in the US for pay-as-you-drive (PAYD) policies. Insurers participating in OnStar Smart Driver include Progressive, Liberty Mutual and Nationwide.
More than 4.9 million OnStar customers have enrolled in Smart Driver since launch, and 2.8 million of them have also enrolled in the optional insurance discount program. GM’s OnStar is further taking part in the Verisk Data Exchange for telematics data and was joined by Honda’s HondaLink in 2017 and Hyundai’s Blue Link in 2018. The Verisk Data Exchange was in September 2019 collecting data from 5.4 million GM, Honda and Hyundai vehicles.
Mitsubishi Motors has become the first automaker to join the LexisNexis Telematics Exchange in 2017. Mileage data from automakers is available to participating insurance carriers through the exchange, enabling insurers to leverage standardised driving data for accurate underwriting and efficient claims processes. The mission of the Telematics Exchange is to help save consumers time and money as well as enhance safety through programs featuring proactive safe driving initiatives and personalised insurance discount offers.
Nissan North America also joined the LexisNexis Telematics Exchange in April 2019. Genera Motors joined the LexisNexis Telematics Exchange this
was selected by General Motors as a preferred insurance data partner, with GM opting for the LexisNexis Telematics Exchange as its preferred portal for sharing consumer-approved connected car data with insurers.
The future
Berg Insight forecasts that by 2023, the installed base of embedded OEM telematics systems to reach 258 million units, from 49 million subscribers in 2017.
