In-car telematics will grow considerably in adoption over the next couple of years. The automotive industry is embracing it and the European Union has put it on its Digital Agenda – under the name of eCall.
A recent overview of what the connected car means for the Insurance Industry can be found here. Some of the ideas and numbers in there date back to 2011. Despite the fact that these ideas are around for a while, Insurance – at least in Germany – is slow in embracing this new model. Here’s two main reasons that are given:
- Fear that the new tariff would cannibalize existing revenues
- Experience or market insight that drivers would not trade a limited reduction in price for the inconvenience to adjust their driving behaviour.
Maybe there’s huge regional / national differences with respect to this attitudinal issue. In any case it is interesting to see that there’s successful insurance startups leveraging the Pay-how-you-drive business model… They obviously don’t have to cannibalize their existing offerings – and they have a good value proposition for young drivers – who would pay much higher premiums elsewhere.
What if the bigger concern might be even deeper? Imagine a world of intelligent cars that avoid the majority of crashes? What’s the future of the car insurance then? As premiums have to cover the insured loss this would at least have an effect on overall revenues… unless there’s new markets where there’s still a growth in automotive sales to drive more revenues.