Skip to main content

How Auto Insurance Adapts to the Internet of Everything

The automotive industry is transforming rapidly as it embraces new paradigms -- such as active safety, on-board automation and car sharing services. The onset of the Internet of Everything (IoE) has also created new applications for sensor data that can be applied toward the development of new business models.

As an example, the Usage Based Insurance (UBI) subscriber base broke through the 10 million member barrier, mainly driven by the ongoing adoption of these offerings within the U.S. and Italy. While it's been a turning point for the market, many obstacles remain.

According to the latest market study by ABI Research, fundamental UBI impediments include privacy concerns, low awareness and perceived value, lack of scalability of on-board diagnostics (OBD) approaches and unclear future business models.

Market Development Challenges

UBI first-mover profitability gains -- based on the self-selection of low-risk drivers -- will ultimately not be sustainable. The auto insurance industry aims to address these issues through smartphone and embedded car OEM approaches, integration of UBI in a wider set of telematics and connected car services, turnkey solutions and customer-centric CRM approaches, and the use of contextual rating variables.

"While the auto insurance industry actively addresses issues, it is important to note that ADAS in the short term and driverless vehicles in the long term will dramatically reduce accident risk," says Dominique Bonte, vice president at ABI Research.

ABI analysts believe that this will inevitably result in UBI and auto insurance largely losing its relevance, which is apparently a reality that the involved parties are often reluctant to accept.

The new automotive smart mobility landscape offers multiple opportunities for UBI providers who are keen on leveraging their data analytics assets, risk assessment and auditing expertise:

  • Getting Involved in the Connected Car Big Data and Analytics explosion through a wide range of services from traffic, weather, parking spaces and prognostics to AI-enabled driver car algorithms, including quality and performance monitoring.
  • Extending Offers from Personal Insurance to product, fleet and corporate liability coverage.
  • Launching Cyber Security Services and Insurance, especially related to real-time monitoring of vehicles on the road.

According to the ABI assessment, with the known automotive safety threat now shifting from the physical to the digital environment, auto insurers will need to transform their commercial operations accordingly.

"In this respect, UBI should be seen as a stepping stone toward a more holistic risk assessment and insurance approach," concludes Bonte. "It will address new challenges in a smart mobility landscape consisting of shared driverless vehicles, multi-modal transportation, and an experience-based, usage- and data-centric IoE environment."

Popular posts from this blog

Digital Transformation Spending Reaches $1.8 Trillion

Ongoing investment in business technology will remain on track, despite concerns about the global economic outlook which continues to evolve in 2022. Enterprise CIOs and CTOs are focused on operational profitability and digital business growth goals that are enabled by strategic IT initiatives. Global spending on the Digital Transformation (DX) of business practices, products, and organizations is forecast to reach $1.8 trillion in 2022 -- that's an increase of 17.6 percent over 2021, according to the latest market study by International Data Corporation (IDC). Many anticipated DX investments will sustain this pace of growth throughout the 2021-2025 forecast period, with a five-year compound annual growth rate (CAGR) of 16.6 percent. Digital Transformation Global Market Development "IDC expects to see aggressive DX technology investment growth in 2022 following a minor slowdown during the pandemic period," said Craig Simpson, senior research manager at IDC . "As orga

Flexible Working: Why Company Culture Matters

The main reasons for the Great Resignation are obsolete leadership, fearful middle managers, and a toxic culture that hinders employee engagement. Perhaps that's why some organizations are still struggling with the consideration and development of a flexible working model.  They're incapable of evolving to a more enlightened approach to work where employees are treated with respect. They're stuck in a bygone era of the 20th-century industrial revolution where 'shareholder value' tops all other values, and where spreadsheets and financial data analysis drives all key decision making. We should not be surprised that 76 percent of human resource (HR) leaders now feel that hybrid work challenges an employee's connection to organizational culture, according to a recent survey by Gartner. A 2022 poll of HR leaders reveals the most challenging aspect of setting their hybrid strategy is adjusting the current organizational culture to support a hybrid workforce. In fact,

Energy Sector IoT Cybersecurity Gains Momentum

The electric distribution industry continues to invest in digital transformation projects. Advanced Metering Infrastructure (AMI) technology is becoming a driver for connected electricity meters, which will reach an installed base of 1.3 billion by 2027. AMI growth is prompting utilities and energy suppliers to revisit their IT infrastructure security and device management operations, according to the latest worldwide market study by ABI Research. Energy Infrastructure Security Market Development Digitization of traditional electricity grids and the modernization of the aging energy infrastructure is among the top concerns for utility operators and governments worldwide. Security for last-mile energy consumption applications was frequently overlooked. "However, the introduction of AMI, smart metering, and grid digitization is steadily increasing spending for secure management services, assisting implementers to transition to IT (information technologies) and OT (operational techno