What’s ahead as insurers, automakers partner on connected cars

Partnerships between automakers and insurance carriers have existed for decades, but more recent deals offer customers insurance options at the point of sale using telematics data capabilities built into connected-car platforms.

Matthew Carrier, principal at Deloitte, says original-equipment manufacturers – or OEMs – have had insurance operations since the 1990s, but the recent surge in more partnerships was triggered by telematics. Almost all new cars have a connected system within the vehicle that collects data on how and where the vehicle is being driven.

“The automakers see the telematics data as an important aspect of where the insurance market is going, a lot of carriers have telematics solutions on a phone with an app, but I do think that the telematics data that the OEM is generating is more consistent,” says Carrier.

But for insurance purposes, telematics data can’t stand on its own. Traditional insurance factors, like historical accident data are necessary too, which is why the partnerships are happening.

“OEMs are collecting information and they know how cars are being driven and when an accident happens, but they don’t know how much it costs and what the outcome was – that information is being captured by the insurance carrier,” says Carrier. “To solve for better pricing, you need both predictive analytics and predictive modeling.”

Team up
Will Nicklas, chief operating officer at Toyota Insurance Management Solutions, said via email that it appears many OEMs are seeing the same opportunity. Toyota recently launched its first branded insurance product in several states underwritten by Toggle, a brand of Farmers Insurance.

“As we developed various UBI options for customers it became apparent customers welcomed a broader conversation around insurance options when they purchased their new vehicle,” said Nicklas.

Mercedes-Benz USA and its subsidiary Daimler Insurance Agency have also partnered with an insurer–Liberty Mutual is working with the OEM on its branded insurance product Mercedes-Benz Insurance.

Wen Liu, head of insurance at Mercedes-Benz Mobility North America, said via email that insurance is integral to vehicle ownership.

“We see more seamless integration with insurance offerings across the vehicle purchase and ownership journey as the future for us,” said Liu. “That integration will come from several facets, ranging from the customer experience to policy coverage.”

Liu added that technology including telematics and the inclusion of various safety technologies within the underwriting process like antilock brakes and adaptive braking is ahead.

General Motors recently announced plans to launch an UBI product in some states this year. GM’s OnStar Insurance Services is underwritten by American Family.

State Farm and Ford announced a partnership for UBI for new vehicle owners. Drive Safe and Save Connected Car is available in several states with plans to roll out more this year.

Tesla also offers its own UBI product in five states with plans to expand. The electric vehicle maker previously partnered with Liberty Mutual on insurance products.

Brian Levine, vice president of strategy and analytics at Mobiquity, a consulting firm, says car manufacturers are watching and learning from these partnerships before offering their own products without insurers.

“You can’t fight gravity, it is going to happen,” says Levine. “Insurers need to look at what they can offer unique to the auto company. The used car market will support insurers, but long-term, insurers need to know that this is coming. … At the same time insurance is not what these companies do but Tesla can fail for a while.”

Digital Insurance spoke with several insurance analysts about the possible future ahead for these partnerships and whether more OEMs would consider offering their own insurance products without underwriters.