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SBD: UBI opportunities for carmakers Prepared for Insurance Telematics 16, June 30, 2016
The largest team of in-car
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90% of OEMs
65% of Tier-1s
60% of Service Providers
SBD NA (Michigan, USA)
SBD EU (Milton Keynes, UK)
SBD Japan (Nagoya, Japan)
SBD India (Bangalore, India)
Stephen Longden
Specialist,
Connected and Autonomous Car
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Our Mission
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About SBD
Our Areas of Expertise
Connected Car
Infotainment
Telematics
Apps
Autonomous Car
Active Safety
Self-driving
V2X
Secure Car
‘
Mechanical
Electronic
Cyber Threat
The car experience continues to evolve
4
“more change in next five years than the previous 50” ~ Mary Barra, GM CEO
The Horse
The Affordable
Car
The Personal
Car
The Safe
Car
The Reliable
Car
The Integrated
Car
The Shareable
Car
The Self-driving
Car
”I want a car”
”I want a car
that reflects
me”
”I want to keep
myself & my
family safe”
”I want a car
that doesn’t
break down”
”I want my car
to connect to
my digital
world”
”I want to have
access to a car
only when I
need it”
”I want to use
my time in my
car more
productively”
Carmaker’s perspective
5
Carmaker’s Perspective
What UBI opportunities exist for
OEMs, and which car companies
are offering UBI products?
UBI options for carmakers
6
Revenue versus volume
Low
High Potential Revenue
Po
ten
tia
l V
olu
me
H
igh
Low
Aftermarket device with partner
UBI insurer
Low risk for OEM. No development.
Attractive to niche markets.
Sales channel limited to dealer/finance
at point of vehicle sale
Factory TCU, generic vehicle data
sent to UBI partner(s) for processing
Highest potential volume. Low
complexity as no 3rd party code on TCU
Higher data costs than pre-processed
data option
Factory TCU, pre-processed
vehicle data sent to UBI partner
Lower data costs than ‘generic’ vehicle
data solution
Integration of 3rd party logic onto TCU
can be complex
Example: Insurance bundled in to Finance deal on Fiat 500
This option could offer the best balance between risk and gain. PHYD solutions likely to have higher potential revenue than PAYD. Example: Opel, Europe
Current carmaker products
7 P
HY
D
PA
YD
Factory TCU Aftermarket Device
Insurance bundled
with finance deals.
Aimed at young
drivers.
Cash rebate
rewards for safe
driving
Offers targeting
low mileage
drivers.
Not bundled with
finance.
Discount
eligibility offers
made based on
actual mileage.
First OEM to offer
TCU-based
PHYD.
A phased rollout
is being planned
for Europe, with
the first countries
being Germany,
UK, France, Italy
& Spain
Different solutions,
common goals: Despite the apparent fragmented
approach that these OEMs have taken,
each has a common goal of trying to
‘augment’ their vehicle offer with
insurance as a means of competitive
differentiation. Interestingly, none of the
OEMs creates the ‘driver score’ or white-
labels the insurance – these are still areas
of the value chain which remain with the
telematics companies and underwriter’s
brands.
New entrants in
this quadrant are
expected
throughout 2016,
with UBI being
offered to anyone
with a compatible
factory TCU
Ford
8
Low mileage drivers rewarded at renewal
Negative Scores
The score is used to calculate the discount. No surcharge for negative
scores is mentioned. However, a premium reduction for low annual
mileage (7,500 miles/year) can be affected if the telematics data
reveals that this threshold has been exceeded.
Up-Front Discount
Up to 5% discount is applied to a
policy price for selecting this
telematics product.
Driving Score Impact
Low mileage drivers (<500miles/yr) can achieve a discount as high as
50% on the policy renewal price. This is typically calculated every
renewal period (6 months). The discount is based on data collected
from the previous rolling 12 months.
Trial Period
None mentioned by State
Farm.
Device Cost
No cost mentioned by State Farm. Vehicles with
SYNC (2008+ models capable of requesting a
Vehicle Health Report) do not require a dongle.
Time of Day Impact
None mentioned.
0 9 3 4 1
PAYD
GM OnStar
9
More generous upfront discount than Ford
Negative Scores
None mentioned by any of the partnered insurers,
as the programme is PAYD on mileage only.
Up-Front Discount
Upfront discount ranges from 5%-20%
depending on insurer and State.
Driving Score Impact
None mentioned by any of the partnered insurers, as the
programme is PAYD on mileage only
Trial Period
Liberty Mutual has a 90 day observation period
Device Cost
No cost mentioned by any of the partnered insurers.
Vehicles with OnStar (2004+ models with Vehicle
Diagnostic) do not require a dongle. Active OnStar
subscription is required
Time of Day Impact
None mentioned by any of the
partnered insurers.
0 9 3 4 1
PAYD
Peugeot
10
Bundled insurance/finance for young drivers
Negative Scores
The insurer states that for consistently poor driving
(4 warnings) will result in cancellation of the
insurance policy. Poor scoring will affect policy if the
insured driver chooses to move their policy to a
traditional Peugeot insurance policy.
Up-Front Discount
First year’s insurance for young drivers
bundled into finance repayments
Driving Score Impact
The driving score doesn’t have any impact on the premium
as this is included with the cost of finance.
Trial Period
Not applicable
Device Cost
There are no device costs associated with a Just
Add Fuel Telematics package.
Time of Day Impact
None mentioned.
0 9 3 4 1
PAYD PHYD
Fiat
11
Bundled insurance/finance with incentives and penalties
Negative Scores
Negative scores do not penalise the policy holder, but with a
chance of getting a 15% premium refund it is up to the policy
holder to maintain a good driving score
Up-Front Discount
No upfront discount but Fiat provide an
insurance contribution up to £800 over 3
years.
Driving Score Impact
Driving scores are reviewed quarterly and are used to calculate the next years
premium. Some of the premium may be refunded for good driving scores. A
refund of up to 15% is possible
Trial Period
Not applicalble
Device Cost
There are no device costs associated
with a Fiat i-deal package.
Time of Day Impact
Journey volume and journey
duration between the hours of
23:00 and 05:00 will negatively
affect the drivers score
0 9 3 4 1
PAYD PHYD
Ford UK
12
Bundled insurance finance with two years cover
Negative Scores
None mentioned.
Up-Front Discount
No upfront discount but Ford provide an
insurance contribution up to £2240 over 2
years
Driving Score Impact
Driving scores are used to calculate the renewal premium.
If the driver performs well then the renewal premium is
reduced
Trial Period
Not applicable
Device Cost
There are no device costs associated.
Time of Day Impact
None mentioned.
0 9 3 4 1
PAYD PHYD
Vauxhall
13
Bundled insurance/finance with cashback for good driving
Negative Scores
The insurer states that for consistently poor driving
will result in cancellation of the insurance policy.
Up-Front Discount
18 year olds pay £99 contribution towards
insurance when buying vehicle on finance.
Driving Score Impact
Driving scores are used to calculate the renewal premium. If the
driver performs consistently well then they can earn up to a £33
refund quarterly, after the 1st quarter. Therefore the £99 premium is
returned in full for the best drivers.
Trial Period
Not applicable
Device Cost
There are no device costs associated.
Time of Day Impact
None mentioned.
0 9 3 4 1
PAYD PHYD
BMW Italy UK
14
Low mileage EV drivers get discounted insurance
Negative Scores
None mentioned
Up-Front Discount
Discount is included as part of the low
mileage 5000 mile usage cap.
Driving Score Impact
None mentioned
Trial Period
If driving habits change to higher mileage, policy
automatically converts to non-limited.
Device Cost
Line fitted TCU, so no additional costs associated.
Time of Day Impact
None mentioned.
0 9 3 4 1
PAYD
GM Europe
15
World’s first OE PHYD solution in Europe
Negative Scores
Unlikely
Up-Front Discount
Not yet announced
Driving Score Impact
Likely
Trial Period
Unlikely
Device Cost
Line fitted TCU, so no additional costs associated.
An active OnStar subscription is required
Time of Day Impact
Unlikely
Starting Q2 2016 0 9 3 4 1
PAYD PHYD
GM Octo
16
Carmaker has the potential to significantly reduce the insurer’s fixed UBI costs
The costs outlined below are a conservative assessment by SBD of the key fixed
overheads that the insurer will pay the telematics company for.
The parts of the value chain highlighted in red could be served by car makers who
already factory-fit telematics control units to their vehicles – providing data to the
insurer (via the data profiling party) in return for payment.
GM has implemented the model below in partnership with Octo. Note that the costs are illustrative and not specific or necessarily representative of GM or Octo.
Wired Device
€60 €90
€3.3 €0.66
€2.00 (€200K/yr for processing & app/portal maintenance,
amortised over 100K vehicles)
€155.96
OBDII Dongle
€90 €0 €95.96
Car maker’s potential role
Key messages
17
Dongle-based UBI is not likely to penetrate mass market By analysing the business model of UBI including operating costs, potential impact on claims frequency, claims
value and gross margin for different demographics and markets, we can see that the very best niche cases can
potentially improve gross margin by 10%. However, policies for mass-market would struggle to match the
profitability of non-UBI policies.
The most difficult challenge for UBI is that it adds fixed costs to the insurer’s operation while only offering
variable benefits in return: There is no guarantee that claims frequency will be reduced, losses will be better
managed or customers will be more loyal. These are all potential but variable benefits.
UBI becomes more viable for mass-market when car maker’s data is used When operating costs are reduced by using the OEM’s telematics data, gross margin can potentially be
improved by between 10% and 15% across the board.
Stephen Longden SBD Connected and Autonomous Car
Thank You
