The Future of the Connected Car and the User Based Insurance (UBI). How the Internet of Things (IoT) is changing the world: Gartner says that IoT installed base will grow to 26B units by 2020 for a value estimated of 3.8 trillion USD forming a new era.

Let us focus on the connected car, and the benefits leading to User Based Insurance (aka UBI).

Overall the benefits & the value:

In the B2C arena, the shift is mainly represented by:

In the B2B arena, the shift is mainly represented by:

However it is not about building a device per se, it is connecting with the hearts and minds of next billion

of customers, whilst fostering a deeper loyal relationship with them.

How do we build this connection and develop a loyal deeper relationship with the next billion of customers? There are 4 plays in the new era:

1. Build Information as a service (the data play)

2. Bundle Play

3. Pay as you Go (dynamic pricing play)

4. Loyalty Play

1. Information (data) play must provide benefits to its intended stakeholders recipients, always centered around the end user (the customer) whilst offering a mutually beneficial value exchange, taking advantage of a more frequent contact opportunity to collect behavioral data and in return provides:

To the consumers (policy holders):

1. A better service offering, which ultimately in the User Based Insurance (UBI) case translates into:

a. A fairer dynamic pricing tailored to the needs and the behavior of the end user;

b. A saving opportunity on the policy premium, disrupting the existing motor insurance colluded market, which takes advantage of one tariff floor.

c. Value added services based on the data collected, and that go beyond what current insurers provide.

To the Insurers:

1. An increase in clients` acquisition & demand generation in a cluttered market with no differentiation.

2. An increase in Brand equity through unique positioning (whether as pioneers and/or as technology and lifestyle provider of insurance services that make the policy tangible and provide end user benefits that save lives). That will have a halo brand effect also on the other products and services offered extended to the vanilla products and beyond motor insurance strict policies.

3. A concrete differentiation of their value proposition to all stakeholders of the motor insurance value chain.

4. An increase in actuarial accuracy and better risk management, which translate in higher underwriting margins, especially in an industry where every base point counts.

5. An increase in claims services and administration efficiencies, which benefits both brand preference and end user value as well as margins.

To our society:

1. Incentive to motorist to adopt safer driving habits, ultimately increasing road safety and security.

2. Traffic alleviation 3. Long term behavioral shift that reduces

accidents, therefore injuries and fatalities 4. Fuel consumption reduction, and carbon

emission curtailment.

2. The Connected Car of the future, and the benefits Bundle Play with embedded telematics devices, smartphones apps, which are activated automatically in proximity of the device and trigger automated responses and services to save lives and improve efficiencies in case of severe accidents, and likelihood of injuries.

The above illustrations are a concrete examples of end users benefits, features & services provided by the bundle play, which only an embedded device can really provide & offer (especially in the UBI arena). 3. Pay as you Go (dynamic pricing play)

This is the major disruption benefitting the end users in the UBI example (the policy holders), which obtain both a saving opportunity based on the number of kilometers driven, and cash-flow value with a dynamic pricing billed bi-monthly (for instance) based on the actual number of Km driven. Exactly as you pay today your utility bills, and the behavior slightly improves as the reporting, the visual dashboard on the mobile Apps provide the end users with real-time data on their behavior, driving profiles, and forecast the cost of their actual driving Vs. estimated.

This is also an opportunity over time to tailored pricing and services to each end user (policy holder) needs and wants, with the only accurate and safe possible solution centered around the customer.

4. Loyalty Play Insurers and service providers will see an increase in loyalty and persistency ratios in their customer basis, as well as new demand generation if the pioneer the market. Specifically for the Thai motor insurance market, where the persistency ratio is circa 66%, the

improvements through telematics/UBI are estimated in the range between 14% and 32%.

Conclusions:

How does UBI work?

Additional Information:

credits to a various Insurers, Service Providers, research Companies and illustrators who developed the infographics. You can find them all in my Pinterest board "the connected car" @ http://www.pinterest.com/montesantigio/the-connected-car/