Could Sirius XM be a Telematics Insurance Partner?

Sirius XM (New York) announced a big-time telematics acquisition today: The company bought the connected vehicle services business of Agero (Medford, Mass.) for $530 million in cash.

Agero says it made the sale to focus on its roadside assistance, consumer affairs and claims management services. (The latter is provided to insurance companies.)

"While telematics has been an important and growing part of our business, this divestiture allows us to focus our resources in our roadside vehicle assistance, claims management and information services which will allow us to best serve our clients and their customers in a fast-changing marketplace," Dave Ferrick, CEO of Agero, says in a statement.

SiriusXM says it made the buy because it wants to leverage its customer acquisition and servicing infrastructure, as well as its satellite network, to provide more services than simply satellite radio.

"As the world's leading provider of in-vehicle subscription services, SiriusXM is uniquely positioned to offer world-class end-to-end telematics services," Jim Meyer, CEO of SiriusXM, says in a statement. "The transaction accelerates SiriusXM's development in architecture supporting connected vehicle services, as well as the ability to provide services over both satellite and cellular networks. Agero's connected vehicle team is known for their experience, innovation and technology, and we look forward to welcoming them to SiriusXM as we work to capture the significant growth opportunities in connected vehicle services."

And yes, those services could, potentially, include usage-based insurance. Praveen Chandrasekar, a Detroit-based research manager for Frost & Sullivan that studies the automotive OEM market, said the strategy is similar to Verizon's buy of Hughes Telematics last year. SiriusXM's customer acquisition and servicing capabilities combined with its satellite infrastructure and, now, telematics services make it a force to be reckoned with in all connected car-based products.

[Read Chandrasekar's prediction that the usage-based insurance space would get crowded]

"Eventually insurance will become a part of this. Insurance is fast integrating into services like Ford SYNC and OnStar, and SiriusXM can provide a similar type of enabling infrastructure," Chandrasekar told Insurance & Technology.

In fact, at a time when the biggest usage-based insurance providers see adoption of the product reach a plateau, the marketing potential for a SiriusXM/insurer partnership is vast. If SiriusXM and an insurer of reasonable size joined to offer a SiriusXM-powered telematics insurance product, the existing customer base to draw on could be huge. SiriusXM has more than 25 million subscribers -- it crossed that threshold in July -- which represents about 13% of the size of the U.S. auto insurance market. Only one insurer -- State Farm -- has an auto insurance market share above 10%, according to the Insurance Information Institute.

"SiriusXM's core expertise is they have the satellite bandwidth and they create content. They can say, 'I have the infrastructure, you have the insurance, we each have a customer base'... The permutations are endless," Chandrasekar says. "They now are a whole service provider. The missing piece was using this bandwidth and doing something much bigger."

[Time for an open relationship between insurers and telematics OEMs?]

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio