IoT-centric usage-based insurance is finally coming of age and it is turning the traditional car insurance sector upside down.
Internet of Things (IoT) adoption in various vertical markets is set to disrupt traditional industries by introducing new business models. IoT-centric usage-based insurance (UBI), which uses real-time information about the driver’s driving ability and habits via the in-vehicle telematics system, is a prime example of that trend. It has taken almost ten years for this business model to really take off, due to multiple barriers of entry. But new research by IHS Automotive shows that UBI, with 12 million subscribers globally in 2015, is now a reality. The usage-based insurance market is forecast to grow to 142 million subscribers globally by 2023.
In terms of market share, UBI accounted for 1 percent of the total car insurance market in 2015, a figure that is expected to grow to 10 percent by 2023. ”The main barriers in the past were the cost of the device and insurance companies not pushing that model. There were also legal concerns and a reluctance among consumers to adopt this new model. We are now seeing that insurers are going for a smartphone-based model, which removes the hardware barrier. In the European Union, the introduction of eCall will be a major push for UBI,” said Stacey Oh, manager, automotive technology at IHS Automotive, to Industrial IoT 5G Insights.
New kids on the block
Traditional insurance companies have been slow at adopting usage-based insurance, opening up a new market opportunity for other actors. ”We are now seeing a lot of different players on the UBI market, including OEMs with embedded connectivity as well as the large data aggregators, telecom companies and telematics companies; basically all companies that can process vast amounts of data,” said Stacey Oh. ”Many traditional insurance companies are also making a move towards UBI as they realize the market is shifting.”
With 5 million subscribers in 2015, the US is the largest market for usage-based insurance today and overall the largest car insurance market in the world, with more than 260 million vehicles in operation in 2015. Yet, Italy is today leading the way in terms of market share as UBI accounted for 10 percent of the car insurance market in 2015. The growth on the Italian market was helped by a government decree stipulating that insurance companies already offering UBI products with a blackbox had to offer the box to customers for free and additionally offer an upfront discount on the insurance premium. The United Kingdom is the second largest UBI market in Europe. The model remains however a niche product in other European countries, mostly due to regulatory barriers and lack of customer awareness. ”Uptake has been faster in Italy because of a change mandated by the government. In the UK, insurance premiums for young drivers are so high that young drivers have looked at UBI as an alternative. Insurance regulation has been a major barrier and has slowed down the uptake of UBI.” Indeed, insurance regulation is different in every single state in the US and province in Canada and in every single country in the EU. ”Governments have a role to play as we have seen in Italy, where the prime minister had at one point mandated that companies offering UBI blackboxes should offer the hardware for free,” said Stacey Oh.
In China, where the government began granting foreign insurance carriers access to the market in 2012, around 15 insurers are expected to launch UBI pilot programs this year. IHS forecasts that UBI subscriber numbers will grow from 50,000 in 2015 to over 22 million by 2023. ”The Chinese market will become the second largest UBI market after the US because of the sheer size of the market”.
The next wave of disruption: millennials, autonomous driving
IHS expects millennials to have a major impact on the car insurance market, and the automotive market as a whole, as they are expected to more readily adopt pay-per-ride services. The advent of autonomous driving around 2020 should also fundamentally affect the car insurance market. According to Volvo Cars, autonomous driving technology could wipe as much as USD 20 billion off insurance premiums globally by 2020 as autonomous driving reduces the number of car crashes. Furthermore, as cars become driverless, insurers will have to redefine whom or what to insure altogether.
IIoT News Recap: Volvo Group, Ford, Australia, HP, Hitachi, ABB
Volvo demonstrates self-driving trucks and Ford patents a lookout drone for autonomous driving, while Australia identifies 716 barriers to driverless vehicles. In the meantime, HP embarks on a corporate venture journey while Hitachi pools its IoT capabilities into a new company.
Volvo Group trials self-driving trucks for the mining industry
After announcing self-driving car trials in Sweden, China and the UK, Volvo Group is at it again with autonomous driving, except this time, it is all about self-driving trucks and the promise to revolutionize the mining industry. Volvo Group is indeed partnering with Saab to develop a truck that can navigate and operate fully autonomously above and underground using sensors and GPS technology.
Australia identifies 716 potential barriers to driverless vehicles
Australia’s National Transport Commission (NTC) has released a discussion paper that found a number of barriers, 716 to be exact, to increasing vehicle automation. “Amending these laws shouldn’t be hard, but making sure the new laws are nationally consistent and encourage innovation while ensuring the safety of all road users will be important,” said Paul Retter, chief executive and commissioner of the NTC. The NTC has asked stakeholders to make submissions by 4 July 2016. The final recommendations will be submitted to Australia’s transport ministers in November 2016.
Ford patents lookout drone for autonomous cars
Ford Motor has filed a patent application with the United States Patent and Trademark Office for a drone that could work as an aerial lookout device for autonomous driving cars, the Detroit News reports. The idea is to ”extend the range at which the vehicle is about to obtain information on its surroundings beyond the range of any one or more sensors, visual systems and/or communications interfaces that may be onboard the vehicle,” according to the patent.
HP creates corporate venture arm
HP is embarking on a new journey in corporate venture via the creation of HP Tech Ventures, a new unit operating across teams in the US and Israel, which will be targeting ”early stage companies with cutting edge technologies”, including 3D transformation, immersive computing, hyper-mobility, IoT, artificial intelligence and smart machines. The HP Tech Ventures group will report to Shane Wall and be led by HP Chief Disrupter, Andrew Bolwell.
Hitachi forms new IoT group
Hitachi employs today over 16,000 people worldwide within IoT and generated $5.4 billion in revenue from IoT solutions in 2015. In order to drive its IoT business and go-to-market strategy worldwide, Hitachi has formed Hitachi Insight Group (HIG). The new group will be headquartered in Santa Clara, Ca. and led by Keiji Kojima, Ph.D. ”Few companies possess the expertise and breadth of resources required to deliver IoT solutions and services, and drive real business value at scale. With today’s announcements, Hitachi is making good progress toward positioning itself to be one of the few likely IoT powerhouses as the market shakes out,” said Vernon Turner, senior vice president, enterprise systems and IoT research fellow at IDC, in a statement.
ABB strengthens robotics business with SVIA acquisition
Switzerland-based industrial conglomerate ABB announced it has acquired SVIA, a Sweden-based provider of robot automation cells for machine tending. ”These solutions, together with ABB’s leading position in the Internet of Things, Services and People (IoTSP) will provide a unique set of value propositions to industrial customers globally,” said ABB. The value of the transaction has not been disclosed.
