Insurance companies seek to deliver enhanced products and services by investing in new technologies and partnering with others in the smart-car environment.
When it comes to connected cars, what was once considered to be the stuff of science fiction is now reality.
Many cars are equipped with sophisticated sensors that can monitor not only miles driven, location, and routes used but also a person’s driving behavior as well as vehicle data such as oil temperature, brake wear, and tire pressure.
This technology is enabling a host of new applications that are meeting customer demand for convenience, safety, and security features; advanced vehicle maintenance; and better fleet management.
As the number of applications grows, a strong ecosystem is forming around the connected car, involving a range of participants—among them automakers, insurance companies, telecommunications firms, sensor and chip manufacturers, and digital-platform giants like Amazon and Uber, as well as academic institutions and standards-making bodies.
The rise of this ecosystem is changing the competitive landscape for all participants, especially for companies in the insurance industry. Insurers face digital disruption in a number of areas. Their analytics capabilities, for instance, may be displaced by predictive-modeling or machine-learning technologies. And their traditional data sets, which contain risk profiles based on claims history, may be losing value given the growing availability of real-time data streaming from connected cars.
How must these businesses adapt their technology infrastructures, architectures, and strategies for a world of connected vehicles—and what are the implications of those changes for CIOs and internal IT departments? Our study of global insurance companies suggests that some are unlocking new sources of profit from the connected-car ecosystem.
They are acknowledging the network effects that are taking hold in their industry and, on their own and in partnership with other ecosystem participants, they are investing in new technologies and IT-management strategies—specifically, incorporating mobile sensors and analytics into their products and services, enlarging the customer data pool, digitizing customer interfaces, and building up internal digital know-how and capabilities.
As a result, they are finding new ways to deliver innovative products and services and to enhance customers’ experiences, and they are forging a path for long-term growth. In this article, we consider the technology investments and IT-management approaches that are most critical for insurers to seize the opportunities presented by connected cars.
Finding opportunities in connectivity
Connected-car technologies are being adopted quickly; according to research by the automotive consultancy Secured By Design (SBD), they are expected to become standard in automobiles by 2020, at the latest.
Some insurers were among the early adopters of emerging connectivity tools and business models. Progressive, for instance, in 2008 launched Snapshot, a usage-based-insurance program that offers consumers discounts of up to 30 percent, depending on when and how well they drive.
More than three million people have signed up for the service, enabling the company to collect a trove of driving data from onboard diagnostics devices installed in customers’ vehicles. Such information, when combined with other data, can be used to assess personal or regional risks—for example, identifying a high frequency of accidents at a particular location for a specific time of day and during certain weather conditions.
Read more of the original article at McKinsey.com.