December 1, 2015
Is Verizon About to Outmaneuver Insurers?
While insurers use telematics to price better, Verizon is offering a connected car app with services that customers really value.
Today, my (snail) mailbox contained a postcard from Verizon offering to turn my car into a connected car. To be more precise, the offer was to my 22-year-old daughter — neither my wife nor I got the same offer. In essence, Verizon provides a device that plugs into the OBD port, a second device that clips on the visor and a smartphone app to control the service. This is an excellent example of other industries seizing on opportunities that should be prime territory for insurers.
Verizon’s hum service (www.hum.com) includes capabilities in six areas: roadside assistance, diagnostic alerts, a vehicle locator, a certified mechanics hotline, maintenance reminders and hotel/car rental discounts. It’s being pitched as a great holiday gift — just plug it in, and you are ready to go!
This is by no means the only offer of this type. Other companies such as Automatic Labs (www.automatic.com) sell OBD devices that provide a variety of services. Automatic has a “Do not disturb” app (Androids only) that keeps the phone quiet while someone is driving, to minimize distractions and reduce the urge to text. The Automatic device/apps will also alert the driver when she is exceeding the speed limit, track when the ignition is on/off, send help if you crash and trigger actions like closing the garage door when you leave the house.
At SMA, we’ve been advocating more varied value propositions for telematics for some time. Some insurers outside the U.S. have ventured into value propositions that have included vehicle location, vehicle performance and some of the other services offered by Verizon. But, in the U.S. today, the primary value proposition for personal auto is the potential to reduce premiums; a few companies are providing other services, such as encouraging safe driving.
What is frustrating is that the insurance industry was the pioneer in telematics and experimenting with the use of OBD devices, car navigation systems and mobile apps based on real-time vehicle data. These efforts stretch back to the late 1990s, with pilots by UK-based Norwich Union, then Progressive and others. Unfortunately, most insurers have been thinking about the potential in the context of current insurance products — a coverage-based view.
The connected world is emerging rapidly, presenting many opportunities to provide services to homeowners, businesses, vehicle owners and other segments. Many of these services are aimed at improving safety and providing peace of mind to individuals and businesses.
Hmmm… sounds curiously like the core mission of the insurance industry.