By Federico Scotti and Claudio Fortunati MBS CONSULTING
The Internet of Things (IoT) is embracing the car industry and carrying the top players of the insurance field towards a brand new business model. Encouraged by the use of Black Box, companies are nowmoving from the age of “customer selection” to the era of “customer relationship”, striving to propose innovative added value solutions. As a background, a cycle of 7 million boxes which have been included in vehicles in the last 15 years, with a 23% market penetration index that is one of the highest in the world. The escalation is not over yet: MBS Consulting valuations state that 9 million devices will be installed in 2020, meaning 28%of insured cars. An era is over for sure. And another one is about to begin. Insurers have started to exploit the valuable information deriving from the acquisition of the driver’s style. The automatic selection offered by the use of devices has allowed companies to create a world of ‘good’ and ‘bad’ drivers: 4-5 years ago, Black Box users took advantage of a 25-30%lower car crash cost in comparison to the ‘traditional’ drivers, thanks to a decreased faulty car crash risk and a minor frequency of frauds. Such an advantage has been lowered over time because of the increasing presence of IoT and is destined to be confirmed in the following years, especially in those areas in which drivers maintain a virtuous behaviour. This trend will force companies to adjust their added value creation strategies and to reconsider the advantages of the adoption of IoT technologies. In Italy, such strategies leverage on the cornerstones of the improvement of technical performances and customer relationship. From statistic to dynamic data. In terms of performance improvement, Companies are analysing new risk evaluation tools and applying traditional evaluation techniques – e.g. assessing future risk through “static” data such as historical records, demographic, driver’s age, car model- as well as through the acquisition of “dynamic” factors provided by the installation of telematic devices on board (distance travelled, driving style). Context elements such as weather conditions, traffic, other drivers’ behaviour, and dangerous routes analysis can integrate the acquired information. The first quantitative outcome show that some specific, “dynamic” variable provide a more accurate and detailed risk analysis in comparison to other amounts of information that insurers use and collect to set insurance premiums. These improvements result in a strong impact on car crash management processes: thanks to IoT technologies, Companies are now considering new innovative models to increase their profitability. Black boxes are no longer just a powerful tool to prevent frauds, since they represent an opportunity for a more efficient car crash report and preliminary activities management. The prompt availability of amounts of information that can be easily collected at the time of the car crash, in particular, play a key role in the process of identification of both parties, statements verification, determining faults and responsibilities and, in some cases, a first evaluation of vehicles damage. At the same time, Companies can assure proactive assistance at the time of the accident, e.g. providing assistance for accident reporting module compilation or supporting in the process of information material collection, thus reducing the client’s administrative burden. Such an innovation will have a strong impact on the traditional pay off model and will accelerate the management of minor accidents through an increased automated process. The second cornerstone consists in a carefully engineered, improved relationship between Companies and their customers. Driving style information represent a crucial element for Companies willing to play a key role in the initiatives aimed at increasing road security standards. The topic brings insurance Companies back to their original role: to protect and to assure high safety levels to their customers. Basing on these principles, Companies should exploit IoT technologies to offer their underwriters customised services dedicated to prevention, safety, road education and to adjust the premium as necessary, according to personal driving style and behaviour. In a market that will put insurers under an increasing pressure, IoT represents a strategic incentive for companies to increase their uniqueness and profitability, not only defending and protecting their position on the market but developing their customer base and profitability as service providers for their clients. Clients that will finally establish a dialogue with the Companies.