Article Synopsis :
Connected-car technologies are being adopted quickly. According to research by the automotive consultancy Secured By Design, connected-car technologies will ship as standard in all automobiles by 2020, at the latest. This article from McKinsey offers suggestions to insurers looking to capitalize.
As telematics technologies gain traction, traditional insurers undoubtedly face disruption from new participants in the connected-car ecosystem in areas such as customer interaction, analytics, and network and service management. Turned on their head, however, these disruptions also present significant opportunities for insurers.
The potential for new services expands far beyond traditional insurance. A company could, for example, advise consumers on the best time to sell their car, offer coaching on driving behavior to save fuel or to increase safety, locate the nearest and cheapest gas station, or predict maintenance needs. Allstate, for example, offers driver assistance in case of emergency or breakdown, and other firms provide gamification software for improving a person’s driving skills. Expanding offerings in these ways will enable insurers to shift from pure insurance products (with perhaps one customer touchpoint per year) to insurance–service hybrids (with conceivably daily touchpoints).
Insurers face disruption – and potential opportunities – in three specific areas:
- CUSTOMER INTERACTION
Disruption: OEMs, telecoms, and digital platform players may offer innovative customer experiences becoming the primary points of contact for risk prevention and insurance.
Opportunity: Insurers can use ecosystem partners to build hybrid solutions strengthening customer relationships via more frequent interactions.
- NETWORK AND SERVICE MANAGEMENT
Disruption: Classic top-down, supply-side approaches may be replaced by peer-to-peer approaches made possible by the internet.
Opportunity: Ecosystem partners can help insurers develop new services – for example, smart-parking applications or advanced-remote maintenance services.
Disruption: Existing (historic) data pools and analytics capabilities may lose value in the face of real-time data streaming, predictive modelling and/or machine learning.
Opportunity: Ecosystem partners may create synergies with insurers with access to big data, data mining, and advanced analytics methodologies.
To succeed in the connected-car ecosystem, insurers will need to continue making significant investments in IT focusing on four areas:
- Incorporating mobile sensors and analytics in products and services. The three fundamental building blocks include:
- Mobile sensors
- Analytical tools
- Customer interfaces
- Enlarging the customer data pool. Insurers will want to build up their own connected-driver databases—a course of action that could put them in direct competition with automakers, digital players, and other companies in the ecosystem.
- Digitizing customer interfaces. Participating in the connected-car ecosystem opens up opportunities to increase and improve the tenor of customer interactions, helping insurers become trusted partners to customers. Digital customer experience is key.
- Building internal digital know-how and capabilities. Competing in the connected-car ecosystem requires product development, data analytics, machine learning, and supply-chain management expertise not typically found in insurance. What capabilities should be developed in-house? How best to work in cross-functional, agile teams?
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Digital Insurer's CommentsOver 50 million connected cars will ship to showrooms in 2018. Connected cars are essentially browsers on wheels. GM’s ‘Marketplace’ platform, which makes recommendations to drivers in real time directly from the dashboard based on predictive analytics around customer preferences and historical behaviour, is just one robust example of where this is headed.
This paper nails the fundamentals of the looming threat for incumbent insurers. Within ten years, in our estimation, motor insurance as we know it will cease to exist. Will the big incumbent carriers continue to dominate – or will they be supplanted by non-insurance competitors?
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