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Frances Perraudin, Telematics Update
Frances Perraudin, Telematics Update
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Telematics OEMs and Insurers: Time for an Open Relationship?

The rise of usage-based insurance fuels concerns that car manufacturers will try to hijack the auto insurance business.

The relationship between insurers and car manufacturers was once of peaceful coexistence. Sure, there was the occasional tension over whether immobilizers or anti-crash systems should become standard equipment in cars. But, by and large, the two sectors got along and even collaborated on the occasional joint study into car safety.

The rise of usage-based insurance (UBI), which uses driving behavior and other usage-based data to price insurance risk, threatens to complicate things. Car OEMs with embedded telematics systems in their cars are now in a position to control access to the data. And there is also anxiety, particularly in Germany, that they will try to take over the insurance business altogether.

"Some insurers are worried that car manufacturers will try and become insurers because they have direct access to pricing data," says Ofir Eyal, a principal management consultant in the London office of The Boston Consulting Group. He links it to a period in the mid-2000s when certain automobile manufacturers started to offer car loans. "The launch of loans from OEMs took half of the market share from banks – they were very successful."

In many ways, all that is missing for OEMs to succeed in car insurance is a credible business model, something car manufacturers are studying, according to Eyal. "They've really woken up to the fact that there is financial gain to be derived from telematics," he says.

In the United States, the anxiety is not so much about OEMs trying to take over the auto insurance business as it is about overcoming the wide range of data-collection systems in use. The three big American car manufacturers – General Motors, Ford and Chrysler – all have very different telematics devices and standards. "This makes it difficult for insurers to connect directly with the car manufacturers at the moment," Eyal explains.

At Insurance Telematics USA 2013 (September 4-5, Chicago), Ford, Allstate and Volkswagen will 'Scrutinize the Insurer-OEM Relationship' in a dedicated session at this industry leading event. Here's an overview of the topics:

  • Look at how vehicle diagnostics such as system reliability and health reports may complement a UBI program and increase customer satisfaction by reducing the cost of vehicle ownership

  • Discuss how to create an agnostic relationship between insurers and OEMs for device compatibility and data sharing to create UBI solutions that work across vehicle types

  • Discuss how insurers can partner with OEMs to offer a comprehensive insurance program to remove fears OEMs may one day take control of the market

For more information about this session and the full speaker line-up please click here:

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