Imagine pulling into a parking garage, getting out of your vehicle and instructing your car to park. While you are walking out of the garage, the car contacts your smart phone, providing it with the exact parking location. While this scenario might sound highly futuristic, Volvo already has a pilot in production and plans for commercial adoption in just five to 10 years.
The capabilities of in-vehicle technologies are rapidly expanding and consumers are beginning to not only take notice, but also demand what many refer to as “connected vehicles.” These vehicles offer numerous advantages to the driver including advanced navigational systems, traffic information and streaming music. Connected vehicles, however, can go beyond simple driver assistance and entertainment to provide significant safety features in the form of driver warnings and crash avoidance.
To better understand attitudes toward connected vehicles, Accenture surveyed over 14,000 consumers across 12 countries. We found that connected vehicles not only intrigue consumers, in-car technologies are actually heavily influencing their buying decisions. In fact, nearly 40 percent of those surveyed indicated that they would choose a new vehicle based on its technology over its performance.
Consumer attitudes are changing
Consumers have come a long way from insisting that they would never allow an insurer to track their driving behavior. Nowadays, they are not only embracing usage-based insurance (UBI), they are looking for new ways that in-vehicle technologies can reduce insurance payments and increase safety.
For example, the majority of consumers surveyed were open to a black box or in-vehicle video camera that records accidents. In fact, 95 percent of consumers indicated that they would be open to a stolen vehicle tracker.
Perhaps more importantly was the respondents’ enthusiasm for vehicle safety features. Almost all of those surveyed either currently use or would like to use a system that stops the car automatically. Over 60 percent prefer to use a technology that warns about lane changes or potential collisions.
This enthusiasm could impact the insurance industry in two ways:
- First, the collection of additional data in real-time may enable insurers to base rates more on present behavior than past actions.
- Second, evolving safety features that reduce human error can transform the goal from claims-minimization to claims-free driving.
To take advantage of more highly connected vehicles, insurers will need to look closely at their underwriting and business models. By offering more individually tailored services, insurers can add the value needed to drive customer loyalty and help to defray the commoditization of the industry.
New opportunities in the sharing economy
If consumers are already making buying decisions based on vehicle connectivity, it is likely that they will begin to base their rental decisions on the same criteria. These decisions will apply not only to traditional car rental companies, but also to those that participate in the sharing economy. In past blogs, I have discussed how this $26 billion economy, with its emphasis on access over ownership, is looking to the insurance industry for leadership in managing risk. As connectivity in cars becomes more prevalent, the demand for insurance solutions that are customized to the car-sharing industry is likely to become stronger.
Connected vehicles may help insurers to develop new models of insuring car-sharers in the following ways:
- Significantly more data could be collected on vehicle usage and driving behavior in the car-sharing market, allowing for increasingly sophisticated underwriting techniques that are specifically geared to this emerging industry.
- Pay-as-you-drive models, such as that used by MetroMile, might be expanded to include driver behavior. Drivers could be charged renter’s insurance for the duration of their rental. Alternatively, car owners could be rewarded with discounts for selecting renters that are likely to have safe driving behaviors.
- Individual renters with poor driving behaviors could be immediately identified, allowing car owners and car-sharing companies to exclude that driver from further participation.
- Collective driving behavior and usage patterns could be used by both insurers and car-sharing companies to better guide renter-selection, insurance rates and safety recommendations.
Finally, as safety technologies become more prevalent in all cars, insurers may begin to more heavily weight vehicle safety features when setting rates. While individual driving behavior would still be a consideration, that factor is likely to become less significant in underwriting as the potential for human error is minimized.