Review – Telematics the game changer – Reinventing auto insurance – AT Kearney
The insurance telematics conference currently under way in Chicago (Sept 4 – 5) is being told that telematics will be the biggest game changer in the vehicle insurance market for more than 50 years.
Consultancy AT Kearney, internationally represented, but usefully with offices in Chicago, is unusually plain speaking on the subject – ‘Telematics … could dramatically alter the auto insurance industry’ it says in a report released at the conference.
It contains some snappy stuff – for a start a useful definition of telematics – ‘the integration of mobile communications, vehicle monitoring systems and location technology’. It also has a clear description of the way insurance is changing.
However, from what we have learnt already from the conference (see our reports) a dose of scepticism could well be useful in the insurance boardrooms.
“The winners will be those early movers who capture the safer drivers, take advantage of pricing power and strengthen customer relationships while easing customers concerns about privacy”
It quotes impressive statistics – ‘In the US major insurers, representing over half the personal auto insurance market have begun exploring or implementing telematics – and are learning’. It calculates that by next year – 2014 – 20% of all US cars will have embedded technology.
However, as we have already noted in our conference reports, there is a way to go yet. While Kearney may be right you cannot ignore the daunting array of products designed for the telematics market, each requiring specific methods of management and insurance product design. There are other issues – the problems of managing the sheer volumes of data the systems generate – and sorting the wheat from the chaff – are far from resolved. Witness the panic in the markets recently when data crashed for reasons yet to be explained.
And then there is the whole business of the consumer interest. First, what do they actually get in terms of benefit? And second, the security and privacy issues are not going to be swept away any time soon. People are more worried by the mis-use of data than this report appears to recognise. Who owns the data (the customer? the appliance or software maker? the insurer?) is an issue generating headlines.
Kearney is upbeat on this: ‘Once the leaders assure customers of the compelling value of telematics – and it gains broad appeal – customers’ privacy concerns will begin to wain.’
Kearney’s pitch is for the CEOs to set up ‘incubator’ approaches to ‘accelerate innovation’ – (though silent on the use of external assistance).
It is my view, based on working alongside consultants as the employee of a large undertaking (the electricity supply industry), that invariably the real experts are those working within the company. It could be that the insurance companies themselves already have within them the depth of knowledge, familiarity with the industry and its clients, its procedures methods and systems, required to evaluate these technological offers and implement them without being drawn into inconclusive contemplation of things that might or might not happen.
And what about the customer? The report does not have much to say about the consumer interest – which at the moment seem unrepresented. Perhaps government represents the public interest, but the report sees the government role in terms of promoting the industry’s product under defined terms – fuel consumption, emissions and highway safety.
Of course, these are important concerns – but so are issues of data collection, data ownership and rights. Here lie interests and concerns requiring honest acknowledgement and determined resolution.