Tesla might be the digital darling of the auto world today but GM has a formidable digital transformation strategy and insurance through its Onstar business. With 30 million connected vehicles by the end of the decade who will be the driver in insuring those vehicles? GM or incumbent auto carriers?
GM how the company will transform from automaker to platform innovator through the targets set within our Growth Strategy. Part of GM's software and services growth will come from OnStar Insurance, projected to have a potential revenue opportunity of more than $6 billion annually by the end of the decade.
GM states its three rights to win:
1) Access to GM customers
2) GM's superior vehicle data
3) The GM ecosystem will help us to achieve this goal.
OnStar Insurance intends to leverage these three elements to integrate insurance into the vehicle purchasing and ownership experience, making the insurance buying process more seamless and convenient for our customers.
VW, Toyoto, Daimler, Volvo, Ford, PSA, Renault/Citroen/Nissan...... all the auto OEMs have set similar goals. Electric vehicles power trains have about 20 components compared to the circa 2,000 of internal combustion engine vehicles. Picture this image from the Financial Times on 8th October:
It is 2030 and your electric VW has developed an annoying habit of pulling to the right. A few years back, when your last petrol car started doing something similar, a local mechanic in overalls spent half an hour wrestling underneath it with a torque wrench and a few muttered expletives. Today, you link to the car’s control system from your tablet at the breakfast table and talk through an online portal to a VW technician in Hyderabad. Sure enough, it’s a software glitch. A patch is sent over the internet, and the repair is done.
The shift in the technology and composition of autos will open opportunities for innovative companies in emerging markets — just as China’s BYD has leveraged its success in developing battery technology to become a leading electric auto producer in its own right.
What does that mean for auto insurers and repair networks. The trends to embedded insurance is relentless and auto OEMs plan to monetise the data their vehicles generate. Who will win the profitable share of those revenue streams?
Elon Musk challenges the status quo announcing Tesla will insure its own vehicles. For now Tesla is licensed as a broker ij the US to conduct business on behalf of the State National Insurance Company Inc, a unit of Markel Corp MKL.N. In the UK Tesla partners with DLG.
The promise from Musk is that the superior data Tesla gains from its vehicles will make a big difference.
"Tesla hopes to use its crash data not only to improve their insurance operations but also to learn how to adjust their car designs for less expensive repairs in the future. On the call, Musk said it was, “very helpful for us to have a feedback loop to see what is driving insurance expense.” Seeing collision repair costs of $15,000 is “crazy,” he said, and emphasized that the feedback loop from the insurance data back to the design and manufacturing teams was invaluable. "
Elizabeth Bart Milliman Sep 2020.
Tesla might have superior data on from its vehicle software including the Tesla driver behaviour. But there is far more to insurance than just the vehicle and driver. Third party involvement and liability, personal injury and in countries like the UK the trials and tribulations of credit hire. That is where the carrier has a distinct edge.
And insurance for Tesla vehicles is complicated by the different State Laws in the USA hence only being currently available in a few States. Never mind considering the global market and the differing regulatory regimes in each country.
Other auto manufacturers partner with insurers like GM/OnStar in the USA. eCall is an automated instigator of FNOL at times of collision/road traffic accident and OnStar's customer service centres triage support from the emergency services and roadside assistance partners. ECall is, of course, only deployed on newer vehicles so there is a growing market for apps on smartphones from the likes of The Floow, Sfara, TRAK etc. for drivers of older vehicles without eCall.
But again the insurance aspect, much hyped, is no more than a partnership with a carrier. Not a potentially disruptive change. This focus is also coming from the viewpoint of the auto manufacturer and/or the carrier whilst the insurance is bought by the policy holder. They actually buy from
- Aggregators/price comparison websites
- Direct from traditional carriers
- Direct from full-stack insurtechs
- Indirect via brokers and MGAs
- At point of sale via auto manufacturers
Two- or three-car families usually have policies from different sources whilst certain carriers and insurtechs offer multi-vehicle policies. This complicates the picture. Omni-channel and different buying behaviour and motives.
So the question as to who will win the tech race is equally complicated. Carriers and insurtechs are investing time, money and resources in various platforms and software whilst auto manufacturers are doing the same. Auto manufacturers wish to keep customers within their own networks of body shops and repairers whilst carriers want to use their own repair networks. OEMs want a tied market for their own components and parts whilst the insurer wants the optimal mix of reclaimed, less expensive and quality parts.
The rising deployment of ADAS driver aids climb the ladder towards fully autonomous vehicles (AV) reaching level three today with level 5 (AV) a long way ahead with regulation being the probable delay to full implementation. Level 3 drivers aids are complicated enough making repair and replacement with resynchronisation of sensors etc a critical factor. Where does liability lie should that not be achieved satisfactorily? The carrier/insurtech, the repairer network or the auto manufacturer?
Technology is only a part of the challenge. As auto manufacturers, repair networks and carriers/insurtechs build out their 'ecosystems' each are moving into each others territory and core business models. It is beguiling to picture a Tesla vehicle in a collision leverage eCall to ensure drivers, passengers and third parties are all supported by police, ambulances and medics, the vehicle organises its own tow or transport to the network having ordered all the parts required which are printed at the repair shop ratter than waiting on delivery from a warehouse and so on.
At the moment it is hard enough to automate anything other than body damage using software like Audatex/Solera, Tractable, Xtract etc. But great progress is being made and these innovations and disruptive technologies will determine the future winners.
You can see a future where carriers must outcompete insurtechs to deliver the products and services customers want. Where claims management stays core to some carriers/insurtechs whilst others decide claims are not a core competence but should be outsourced.
And all the time the advance of ADAS beyond level three towards level five means insurance may change from driver or vehicle insurance to product liability insurance. For sure that is where Elon Musk sees the future and as the current internal combustion engine (ICE) champions of the world, Daimler, BMW, Honda, VW, GM move from their core strengths of metal bashing and component assembly to software they will fight that battle.
You do wonder if that is the stage when the digital masters of the world steal the crown and win the race! Amazon, Google, Apple and so on. They understand customers, logistics and virtual engagement. Carriers, insurtechs and auto manufacturers must hope that they can keep their crowns even as the digital tectonic plates move with accompanying earthquakes and tsunamis destroying and drowning rigid companies and ecosystems.
Finance, insurance, manufacturing, asset repair and replacement, robotaxis and autonomous trucks. Disruption and change will upend much of what we see and experience today. Writers who once were in manufacturing and insurance provide advance warning of what carriers, insurtechs, manufacturers, mobility services providers and others must achieve in vision, strategy and pivoting if they are still to be around ten years from now.
Too many CEOs, C-Suites and leaders may y hide behind apparent technology innovation and miss these major tipping points. Many of the potential technology partners should anticipate these trends as well e.g.
• Major core platforms Guidewire, Duck Creek, Majesco, ICE, Pega, Innovation Group and so on. Good on breadth of functionality but sometimes lacking in specifics e.g. claim management. And traditionally involving Capex and high annual licensing costs though that is changing.
• Quote & Buy, MTA & Renewal Platforms like Go-Insur, HUGHUB, iptiQ that enable an insurer to allow a customer to interactively manage all their policies from one dashboard
• Digital Claims Platforms Synergy Cloud, RightIndem, Snapsheet, ClaimsGenius, Salesforce Industries, Five Sigma, 360Globalnet, Claims Technology etc
• Auto Ecosystems CCC, Verisk, Lexis Nexis, Enlyte (formerly Mitchell International etc
• Point Solutions Weathernet, Tractable, Audatex/Solera, Shift, Friss Sprout.ai, Solera and many others
• Combined claims services and technology providers Crawford & Company, Sedgwick, Davies Group, Claims Consortium Group. Control€xpert etc.
• No-Code/Low-Code app building platforms from Unqork, Netcall…
• Embedded insurance Wrisk, Qover, etc
Also in the crosshairs of change are garages, mechanics and aftersales staff. Fewer moving parts should lessen the need for repairs and replacement. As autos become more like computers with wheels, repairs are likely to become a proprietary business run by manufacturers. The need for software engineers will increase. Many are likely to be in remote locations, giving a further boost to the work-from-anywhere world of “virtual” globalisation. New opportunities will open up for local workers in installing and maintaining charging stations, and for garages and mechanics the change will be gradual — petrol and diesel cars will be around well into the 2030s — but will need careful handling.
Governments can help by attempting to get ahead of the curve and expanding training. As governments such as Britain’s Conservatives pledge to invest in a more high-skill, high-wage economy, they must anticipate the extent to which the green revolution will reshape technology and industry. It is vital to equip workers for that new world, not just the current one.
Anew world for the brave is being shaped right now.
OnStar is already the industry’s leading connectivity platform with more than 16 million connected vehicles on the road today, with software and services generating a projected $2 billion in annual revenue. Part of GM’s software and services growth comes from OnStar Insurance, projected to have a potential revenue opportunity of more than $6 billion annually by the end of the decade.