Tag Archives: general motors

A Contrarian Looks ‘Back to the Future’

A recent week started with reading a page by Paul Carroll from his Innovator’s Edge platform. The title question was: “Will Apple enter insurance? Google? Microsoft? Amazon?” His opening statement was, “Apple’s market value crested $1 trillion last week, and its big tech brethren Google, Microsoft and Amazon aren’t far behind, all are valued north of $800 billion…”

I wasn’t shocked until he said, “All have extensive data about customers. And all have the size to tackle mind-bending problems that insurance faces – by contrast you’d have to combine AIG, Prudential and Allstate just to surpass $100 billion in market value…”

A day later, someone sent me Reagan Consulting’s “The Golden Age of Insurance Brokerage.” As I read through this short update, I could almost hear, “Happy days are here again” playing in the background for the brokers. The following captures the essence of this document: “We are living in the Golden Age of insurance brokerage. There are so many good things happening, it is hard to keep track of them all.” This was followed by six bullet points providing evidence of why the brokers are so happy. (No mention was made of insurance buyers, who may not be as HAPPY!)

A friend then sent me a link to “The Death of the Old School Agency,” by Michael Jans. This is a more in-depth view (30-plus pages) of the world as it may or will be.

From the executive summary, we learn that today’s agent faces a new world of:

  • Rapid changes in consumer behavior and expectations
  • Emerging, existing and well-funded competitive channels
  • A rising millennial generation with different expectations, both as consumers and workers
  • A pace of change unlike anything they’ve ever seen before.

Depending upon who, what and where you are, this report will bring good news or bad news, but nonetheless – it is news that (I believe) every agent needs to hear, consider, ponder and then decide on.

Agencies tomorrow are not “your daddy’s Oldsmobile.” Ask someone older than 40 to explain the phrase. This was the beginning of the end of a legendary line of General Motors automobiles and probably a foreshadowing of the collapse of General Motors.

I encourage you to study all three of these documents – they are well-written by very successful folks. Their ideas should be carefully considered, and, if properly adapted to your circumstances, all can improve your results. That is – as long as the world goes as “we the people” in this industry think it should. What follows is my contrarian view – less “raining on your parade” and more clearing the air as you look to the horizon in tomorrow’s consumer-driven economy. We are not in charge. We today are wagering on our individual and industry’s future. Place your bets. The market will pick the winners.

See also: 3 Myths That Inhibit Innovation (Part 3)  

This contrarian will offer his ideas by looking “back to the future.”

There will remain great opportunities in our future, but these will require transformational change. From today’s selling in an industry that is product-defined and product-driven, to a new client-defined and client-driven marketplace where we will facilitate our client’s buying – solving their problems and meeting their needs. In the competitive nature of tomorrow’s world – we’ll have to use artificial intelligence (AI) to anticipate these needs and deliver solutions before our clients “go shopping.”

Some of the people, gifts, expertise, disciplines, skills, etc. we’ll need will be much different than the mechanical process we use today. We will need communicators (verbal and nonverbal), empathizers, artists, inventors, designers, storytellers, caregivers, consolers, big picture thinkers, storytellers, caregivers and “techies.” This is not an all-inclusive list. (Consider reading “A Whole New Mind,” by Daniel Pink.)

Warren Bennis offered the following wisdom decades ago: “The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.”

Consider the following – brief observations from one man’s experience:

  • In 1978, Fireman’s Fund/Famex Agents offered a GM-endorsed insurance program for dealers. I was the SW Louisiana agent. In those days, the No. 1 concern of GM and its dealers was that GM would reach 65% market share and the federal government would break GM up into separate companies, Chevrolet, Pontiac, Buick, etc. GM’s arrogance, the dealers’ complacency, foreign competition, a poor product and a marketplace wanting change reshaped their world. GM never made it to 65% market share. I believe the insurance industry is ripe for a similar transformational experience.
  • In 1994, I was speaking to a bank in St. James Parish (Louisiana) about change. I said, “Today, GM, Sears and IBM are the kings of their respective jungles. I believe, in my lifetime, one of these companies will fail.” I was laughed off the stage. Fourteen years later, I was vindicated with the bankruptcy filing by GM. I personally believe that I’ll also prove right on Sears.
  • In June 2008, I was an instructor for attendees in a risk and insurance class at the KPMG Advisory University in Chicago. This was a continuing education week for KPMG consultants. A rookie consultant asked, “How does an insurance company fail?” I explained with the Champion Insurance story.

Then he asked for an example of a “rock solid” insurance company. I said, “AIG.” The KPMG senior partners in the room nodded in agreement. Less than 100 days later, AIG was functionally bankrupt, requiring a $182 billion bailout by the government. None of us saw that coming. (I’ll bet you were surprised, as well.)

As I wrap up this article, hoping I’ve stimulated a much more important discussion about the future, consider the following:

  1. Companies valued at $100 billion are “big” until measured against trillion-dollar operations in a world in transformation – especially if the giants have better technology and data!
  2. Apple, Google, Microsoft and Amazon (AGMA) are kings of their respective jungles. Yet these companies are not even as old as the majority of readers of this column (with the possible exception of Microsoft and Apple, founded in the mid-1970s). Why would we think that our “old and stoic” industry is “safe” and “promising” for tomorrow? Are we celebrating our past when we should be planning our future?
  3. Do you think that any of your clients who have recently received a rate increase will be as enthusiastic about the profitability of our industry and the future of the world of brokers as stated in the article offered by Reagan? I’ve rarely (if ever) heard a client celebrate the profitability of our industry when it is an expense to theirs…
  4. Generational changes, social media and our societal rethinking of issues of race, gender, ethnicity, family, values, economic models (socialism / capitalism), etc. may result in our going in directions that we, 10 years ago, would have never considered possible.
  5. Has our industry let the government get its nose into our tent/economic system. NFIP has been in this industry as long as I have. The private sector didn’t want to address the flood risk. Now, these nearly 50 years later, the flood program is a government program and not sustainable. Unfortunately, the government may be ready to have the camel stand up in the tent? Medicare for everyone is no longer a crazy idea. It may not work, but….
  6. If the insurance industry was being designed today to do what it does, do you really believe it would be what we have? If you answered yes, please reread the question!

See also: What Is Really Disrupting Insurance?  

Bookstores, travel agencies, video stores, etc. were important in our communities of yesterday – UNTIL THEY WEREN’T. Should we begin redesigning our own operations and industry and future before a competitive innovator does it for us?

The Uberization of Insurance

Our nomination for word of the year is, by far, “uberization.”

This term is used to describe the growing deluge of companies that offer on-demand services from cars to homes to labor, and much more. Many commentators view this economic transformation as a revolution that will see our entire economy shift from one of consumption, to one of access.

And we think they’re correct.

The Rise of On-Demand

The key to an “uberized” economy is where on-demand services meet crowdsourced labor solutions. You see it everywhere. Even traditional businesses are learning new tricks from an avalanche of high-profile acquisitions. Whether it’s Expedia’s purchase of Homeaway, GM’s buyout of Sidecar or Ford’s investment in Lyft, this shift is becoming more undeniable.

On-Demand for Insurance

Now, on-demand services are coming to the insurance industry, the most risk-averse industry, by its very nature. The insurance industry has become more nimble–mostly out of necessity, but that’s a story for another day.

See also: How On-Demand Economy Can Prosper  

Insurance carriers are learning quickly that they need to adapt to the demand of, well, on-demand services. And the integration of the gig economy is the next step in the business evolution of the traditional insurance sector.

Tough Questions for the Insurance Industry

What does the “uber of insurance” mean? What opportunities and challenges does it bring to the industry? The gig economy, sharing economy, 1099 economy, on-demand economy or whatever you want to call it isn’t going away, and consumer participation continues to grow.

Earners, consumers and the old guard of the supply chain are eager to find ways to diversify and optimize business solutions.

How do you satisfy the demand for on-demand data gathering? Claims handling and processing? How does the insurance industry gather the data it needs effectively, efficiently and accurately?

Uber, Lyft, and Airbnb have not only demonstrated that they fill a need in the marketplace, but often they do it better than the traditional options – as uncomfortable a thought as that may be for the old guard in the supply chain.

Can this model work for the insurance industry? It can, and this is how.

Hug Your Smartphone, Save a Tree

Mobile technology is your new best friend when it comes to data gathering for claims handling and processing. The insurance industry is traditionally paper-intensive. Paper is no longer a security blanket, but a wet blanket weighing down processes and impeding efficiency.

Candy Crush and Capturing Data

It’s easy to marvel at the innovation of smartphones from the most addictive apps to the most useful. I won’t get into my Candy Crush addiction; I’m seeking professional help.

The point is to make smartphones work for you and your business processes. Today, smartphones are essential to the daily lives of most of us, providing communication, connectivity, schedules, entertainment and even our wallets. Think about how you can leverage people’s familiarity and affinity for their smartphones by merging it with your smart application development and deployment.

Capturing data has never been easier than point and click…Oops, I mean a finger swipe.

Now more than ever data can be captured, optimized and automatically entered into your data systems and processes. This new process can facilitate the seamless flow of data into business processes without risking it getting stuck to the bottom of someone’s shoe, misfiled, misplaced or eaten by the proverbial dog.

For the notepad next to your computer: seamless data integration at the point of data capture.

It sounds like a dream, doesn’t it?

Sharing Is Caring

First referred to as the sharing economy or the gig economy, the “uberization” of the workforce didn’t originate with Uber. But I’m still voting for “uberization” for word of the year. Merriam-Webster is next on my contact list.

People have always done odd jobs that fit their skill set, hobby, or need. Uber, Turo, Airbnb and WeGoLook through mobile technology have taken this tried-and-true individual entrepreneurship spirit not only to the next level, but to a measurable impact on the economy. Just consider recent sharing economy industry projections made by PwC. I won’t spoil it for you, but you’ll soon be acquainted with the word “mega trend.”

See also: Uber’s Thinking Can Reinvent the Agent  

Crowdsourced labor solutions not only provide diversified earning opportunities, but they also provide options to workers, consumers and businesses alike. Remember our talk about being nimble?

All parties can scale up or down as they choose. They can also select where and how they participate in the gig economy and leverage it to provide for their financial or business goals.

As these on-demand solutions grow, expand and diversify, companies and consumers will have the opportunity to test and identify the best solutions for them, all with a swipe of their smartphone.

Free Market for Solutions

Some will argue the gig economy is the free market at its best, others will argue it’s at its worst. Like anything, it comes back to how individuals and companies strategically apply these solutions to their business challenges.

In the insurance industry, data gathering and claims processing will always resolve around how you can do it faster and better and with fewer mistakes. As the saying goes, “time is money.”

With the help of technology, the reach of smartphones and crowd labor — insurance companies can standardize and streamline data gathering, claims processing and other simple tasks while controlling costs.

For instance, why dispatch an employee across the metro, county, state or even country, incurring all the related expenses, time delays to gather data and take pictures when you can dispatch someone who’s already there?

Not only do you save time travel, and employee productivity, but thanks to the near-universal familiarity with smartphones and standardized mobile apps, you don’t have to train workers.

What if there was an Uber of Insurance? It’s not really a matter of “if” anymore, but of “when” and “how.” The when is now, and the how is through the growing relevance of the insurtech disruption.

‘Gig Economy’ Comes to Claims Handling

Why is this taking so long?!

The challenge I hear echoed throughout the insurance industry is, “How do we speed up the claims process for customers?” Insurance companies often bear the brunt of frustrations from customers stressed out about delays. As we all know, processing claims takes time and patience to gather information, details, photographs and a myriad of other documentation. Getting the right information and accurate documentation takes even longer.

Based on the volume of claims, resources and personnel can become stretched thin quickly. Despite all the efforts within organizations, it’s not uncommon to see claims departments contorting themselves like Gumby to get it all done. Insurance claims are stressful, and relying on customers to reliably and quickly provide information is a challenge — even when it’s to their benefit.

The problem becomes exacerbated following natural disasters or claims in geographic locations where companies have little to no footprint and limited resources to document and gather the information needed. In those situations, companies have to reallocate and sometimes relocate resources, which is expensive, time-consuming and a logistical nightmare.

Saving time and improving data quality and accuracy are all key components to avoiding customer frustration and increasing customer satisfaction and loyalty.

Traditional Challenges Meet Disruptive Solutions

Recently, there’s been a lot of handwringing about the “sharing economy,” the “gig economy” and what it means for traditional lines of business and workers. Will the workplace as we know it change completely? As Tony Canas shared in his Insurance Thought Leadership piece, “What Will Be the Uber of Insurance?,” the gig economy is hardly the end of the world, and the insurance industry is probably due for some disruption.

What a number of traditional lines of business are beginning to discover is that the gig economy presents an opportunity to leverage the power of crowdsourcing to solve challenges, eliminate inefficiencies and even spark innovation within their organizations. Target and Instacart, GM and Lyft, are great examples of how large, traditional verticals are finding ways to integrate the gig economy into new products and services to attract and keep customers while increasing the bottom line.

Now going back to one of insurance’s greatest challenges — saving time and improving accuracy in the claims process, particularly when it comes to getting information such as photographs, records, police reports and inspections. These tasks sometimes feel like they can go on forever with a single claim as companies try to coordinate logistics with policyholders.

What if there was an Uber for insurers? A service that could dispatch an objective third party with a smartphone to quickly take pictures and gather exactly the information needed in the claims process almost immediately?

There is.

Disruption Gets Good for Insurance

Like Uber, WeGoLook is changing the way the gig economy is disrupting B2B by providing inspection and custom tasking services. Building on the strength of the gig economy and using the crowdsourcing model, WeGoLook has built a nationwide network of field agents that provides a nimbleness that is often buried alive in large enterprises.

Here’s how it works at one of the nation’s largest auto insurance companies, where WeGoLook is incorporated into the claims-handling process:

  • A claim handler places an order on a custom dashboard and chooses a service: (1) vehicle photos, (2) scene inspections, (3) salvage retrieval, (4) police record retrieval.
  • A WeGoLook representative calls the onsite contact/policyholder to verify address/item information and schedule an appointment.
  • The “Looker” arrives on-site and captures the data needed for the service/task.
  • Data is submitted via the mobile WeGoLook app and reviewed by internal staff at WGL for quality assurance.
  • The completed report is sent directly to the claim file.

Turning to the gig economy and its on-demand workforce is generating economic benefits and creating true efficiency. We’ve witnessed the process being replicated in companies both large and small and in a variety of categories.

Since starting the company in 2009, I’m continually inspired by the creativity of entrepreneurs and how they’ve found new and inspirational ways to apply crowdsourcing. From crowdfunding, ridesharing, coworking and delivery services to even “pet Airbnb,” the gig economy marketplace is homing in on specific consumer and business needs and delivering.

The Next Frontier for Connected Cars

In 2006, UCLA Professor of Urban Planning Donald Shoup compiled the results of 16 surveys carried out between 1927 and 2001 on the time spent looking for a parking space. He reported that the average time spent looking for on-street parking was approximately eight minutes – a figure that has remained relatively unchanged since the 1930s.

This research also demonstrated that, on average, one vehicle in three in traffic is actually searching for somewhere to park. This figure has been confirmed more recently by a study from the San Francisco City Council, which concluded that an estimated one-third of weekday traffic was because of drivers looking for a parking space.

While solving the problem of road congestion via accurate traffic information has been looked at for decades – the RDS TMC protocol was invented in 1988 – and has already reached a good level of sophistication and accuracy, solving the parking problem via connected services is quite a recent topic and is still very much a work in progress.

As a matter of fact, most pure players in this field have been founded quite recently: as an example, JustPark in 2006; Parkopedia, ParkMe, Worldsensing and Anagog in 2009; and Parknav in 2011. The only companies to have emerged earlier are the parking payment companies, PayByPhone and Parkmobile, in 2000 and Pango in 2005.

On-Street and Off-Street

Parking essentially divides in two markets with two very different problems to solve: off-street and on-street. Connected services taking care of off-street parking are now quite advanced. In the three steps of information, booking and payment, the first is largely available (even if real-time data remains partial), but booking and advanced payment are still works in progress. Very few cars on the road today – or navigation apps – are able to find, book and pay seamlessly for a parking space in a garage.

The on-street parking problem is, by nature, more difficult to solve because detecting free parking bays in real time, at scale is complex and requires many sources of information. There are very different approaches to create this data.

Leveraging Traffic Probe Data for Parking

One is to make sense of the existing probe data currently used for real-time traffic. For example, Garmin is using this data to calculate the inflow and outflow of cars for each road segment in large cities and estimate availability (read here). The company has partnered with Parkopedia to include off-street parking information in their data model.

The GPS company launched this service in their mobile app during the third quarter in six German cities and is now adding cities in more countries: London, Amsterdam, Vienna and a few others coming in the U.S.

graph1

Inertial Data From Smartphones

Detecting parking and “unparking” events through inertial sensor data from drivers’ smartphones is another approach used by Anagog, which built a software development kit now embedded in several million apps (watch here). Through a signal processing algorithm, the company detects out of gyroscope, accelerometer and location data (GPS, etc.) parking events that are fed to a big data cloud that is now nearing 1 billion historical parking events.

Data From Car Sensors

Car makers such as Volkswagen (read here) or General Motors are also looking at producing data using car sensors.

In the case of Volkswagen, a pilot launched by the company uses the existing ultrasonic proximity sensors (used for parking) to assess the availability of free parking spaces on the side of the road when the car drives along a street. The data is uploaded in real-time and matched against map data to eliminate false positive (parking space for disabled people, etc.).

Parking Meters

Using data from on-street parking meters is another opportunity to get real-time, on-street parking information. Because a significant number of these meters are connected to the cloud, it is possible to build predictive data based on historical trends. Parkeon, a worldwide leader in parking meters, is among the companies enabling that opportunity and rendering this data through a mobile app, Path To Park (read more here), which is now available throughout France and in a number of cities in the U.S. and Germany.

Street-Based Sensor Infrastructures

Lastly, companies such as Worldsensing are placing sensors on each parking bay in the street, which obviously provides the most accurate data, but at a cost. Worldsensing, based in Barcelona, just closed a series B round of funding (for an undisclosed amount). Its largest deployment to date was in Moscow, where the company covered 13,000 spots. The next stage of the deployment will include more than 50,000 sensors.

Image processing is also a technology that could be used to sense free parking bays in streets. Data from fixed CCTV (used for security or traffic monitoring), smartphone apps, connected dash cams or even cars could be used for that purpose.

Obviously, the best information will come from the aggregation of these data streams (historical and real-time). Inrix, which announced in June that it will supply on-street parking data to BMW, combines data from cities, mobile payment companies, real-time parking data, connected car-sharing services and Inrix’s database of real-time vehicle GPS data (read here).

Parknav, a start-up based in the U.S. is also using a very diverse set of data (car-sharing, telecom, fleet, crowd-sourcing), including POI data (bars, schools, etc.) to infer probabilities about parking availability.

Accurate information about free on-street parking bays is a complex matter that will take many more years to solve, but the opportunities are huge for the whole car industry and beyond. The first opportunity is the time saved for drivers and the alleviation of stress and frustration. Once this first opportunity will be realized for drivers, its overall social impact will be big: less traffic, less pollution, less money spent on fuel.

Unused Parking Inventory

The last market opportunity in smart parking is to further eliminate barriers between the offer and the demand, between people circling in streets and empty parking bays, in enabling yield management of underused private parking inventory.

Residential buildings, companies, hotels, schools, hospital or churches have parking spaces that are empty or partially used during workdays, nights and weekends, vacations, etc. Companies like JustPark (UK) or Zenpark (France) are targeting this segment using connected technologies to unlock the value of this inventory and grow the total parking spots available.

On Jan. 28 in Brussels, the ConnecteDriver conference, in partnership with consulting firm Inov360, will gather the brightest minds and the most innovative companies to discuss the fascinating topic of smart parking:

– Hans-Hendrick Puvogel, COO at Parkopedia
– Anthony Eskinazi, head of product and co-founder, JustPark
– William Rosenfeld, CEO, ZenPark
– Bertrand Barthelemy, president of Parkeon
– Ruth Portas, sales manager, Worldsensing
– Ofer Tziperman, CEO, Anagog
– Martin Treiblmayr, product manager, Garmin
– Vincent Pilloy, co-founder and CEO, Inov360
– Parknow (speaker name to be confirmed)

The Problem With Telematics

When I attended the Insurance Telematics USA conference in Chicago earlier this month, I expected to see much more enthusiasm. I first wrote about Progressive’s venture into telematics all the way back in the late 1990s, and technology has improved so much since then that the telematics industry would surely be bragging about its breakout into the mainstream or at least predicting that one was imminent. The idea just makes so much sense: being able to track cars so that insurance risks can be determined very precisely for individual drivers, while even providing feedback that improves driving.

While the telematics technology is, in fact, stunning and while there are reasons for great optimism, what I found was not an industry brimming with confidence. I found an industry still searching for the right business model.

Until the industry solves that problem, progress will remain limited.

The Problem

The current approach to telematics is generally to install a device in a customer’s car for six months and have it relay the driver’s actions back to the insurer for evaluation. At the end of the six months, the device is uninstalled, and the insurer tells the driver what sort of discount, if any, she will receive based on her driving habits. A key point is that the issue at hand only concerns discounts; insurers have promised that they won’t raise rates if they find that someone is a worse risk than expected.

Think about the expense that goes into that model: manufacturing the telematics devices; installing and uninstalling them; and transmitting lots of data over a wireless network on which the insurer has to buy bandwidth.

Now think about the benefits. The prospect of a discount has attracted enough good drivers that, if all telematics-based auto policies were rolled into one company, it would be close to being in the top 10 among auto insurers in the U.S. Ptolemus, a strategy consulting firm, said there are 4.4 million cars in the U.S. carrying usage-based insurance (UBI). That’s a lot of cars. But there are 253 million cars and trucks in the U.S., so the market penetration of UBI is just 1.7%. Even in the main ballroom of the conference, full of ardent proponents, only about 5% raised their hands when asked if they had UBI.

Many customers turn out to not be that focused on discounts. They would prefer receiving free access to other services, such as roadside assistance — but what services customers want, how to bundle those services, etc. has yet to be worked out.

Even if some new package of free services drove 10 times as many people to buy UBI auto policies, telematics wouldn’t do much to make roads safer. Insurers are offering incentives to a self-selected group of drivers who are already among the safest on the road but, because insurers have decided they can’t raise rates for bad drivers, won’t be doing anything about the people who cause a huge portion of the accidents and, thus, the costs.

The current business model works — barely. The costs are too high, the offering to consumers isn’t right and the benefits to insurers are too low.

The Potential

Help is on the way from two main sources, which I have seen drive innovation in industry after industry since I started following the world of information technology almost 30 years ago. One source is what I think of as the power of “free.” The other is the power of a platform.

The Power of “Free”

The behavioral economist Dan Ariely has done all sorts of experiments about the power of free and found that it is almost magic. For instance, if someone does volunteer work and you decide to thank him by paying him a little, he will likely cut back on the work he does for you or even stop. Ariely reasons that people evaluate paid work in a hard-nosed way — how many hours do I work, how hard or skilled is the work, how much do others get paid for this work, etc.? — and evaluate volunteer work based on altruistic measures, such as the quality of a cause. If you have people evaluate the return from their free work on a paid scale, you’ll lose them. Similarly, he says, you can get people to do all kinds of uneconomic things if remove a paltry cost and make something free.

The power of free computing and communication has driven the upheaval of business over the past 30 years, spawning the wide adoption of the Internet, smartphones, etc. and all the business models that have come along with them. (Obviously, we still pay for computers and storage devices, but they are essentially free by comparison with where they were in the 1980s — a gigabyte of memory, which cost $300,000 then, costs about a penny today. Communication costs have gone way down and are headed toward something approaching free, even though telecom and cable companies will fight a rear guard action as long as they can.)

Now the power of free is coming to telematics, because the cost of acquiring information on drivers is heading toward zero.

In the short term, that will be because of smartphone apps. Although some say the data they generate isn’t quite as precise as that from sensors in cars, the apps are good enough for the vast majority of uses, and they cost roughly nothing. There isn’t any need to make a dongle for the car and install and uninstall it. Nor is there a need for the insurer to buy a wireless data plan for the car. The app can do most of the analysis on the phone and just send modest amounts of data back to the insurer, using the driver’s wireless plan.

In the long term, things will get even better as “connected cars” move into the market. These cars, already connected wirelessly to the Internet, will automatically generate the kind of information that insurers need. Insurers will be able to know what kind of a driver someone is at the moment she applies, rather than having to guess and then wait six months to know for sure.

The Power of a Platform

From the 1950s through the early 1980s, when IBM controlled the computer industry, the pace of innovation was glacial by today’s standards. Part of the reason was that the pace let IBM milk maximum profits, but part was also because IBM had to produce what software types would call the “full stack.” IBM had to develop the semiconductor technology that allowed for faster processors; design those processors; manufacture the processors; design and manufacture just about all the support chips, especially memory; assemble the mainframes; code the operating system; and generate the major pieces of application software. Everything had to come together, from one company, before the next step in innovation happened.

When the PC came along in 1981, with its open architecture, innovation became a free-for-all. Intel owned the chip, and Microsoft the operating system, but everything else was fair game. Companies flooded into the market, innovating in all kinds of smart ways, especially with applications such as the spreadsheet, and the market took off.

The telematics market is well on its way to making the transition from the IBM mainframe days to the open days of the PC and beyond. Initially, Progressive had to pull an IBM and invent the whole process for telematics from beginning to end. Now, an ecosystem has developed, and all sorts of companies are free to innovate at any part of the process.

Verisk has announced an exchange, to which car makers and insurers can contribute data on drivers and from which they can pull information. GM has said it will contribute data from its OnStar system, and GM has one million 4G-connected cars on the road in the U.S. So, the need for everyone to generate their own data is going away.

The Weather Channel (represented on the panel I moderated at the conference) has information that can correlate bad weather very precisely with driving behavior — the company is even working to aggregate information on the speed at which cars’ wipers are operating, to understand in a very granular way just how severe a storm is in a certain spot.

Many other companies are innovating in new parts of the ecosystem, rather than just focusing on pricing risks better or acquiring customers. For instance, my friend and colleague Stefan Heck, a former director at McKinsey with whom I wrote a book (along with Matt Rogers) about how innovation can overcome resource scarcity, just unveiled an extremely ambitious approach to improving safety, through a company called Nauto. (A writeup in re/code is here.) Agero made a presentation at the conference about how telematics can speed claims processing and cut costs while making customers happy — essentially, the telematics system notifies the insurer instantly about an accident, so the insurer can provide whatever reassurance and help is necessary, while also sending someone to the scene so fast that it can take control of the process, rather than deferring to, among others, municipal towing companies.

The Future

The power of free and the power of a platform ensure that, before too many years go by, the costs for telematics will drop drastically and the benefits to insurers and customers will increase greatly. That still leaves insurers with the task of figuring out the right offering to customers, but, in my experience, once costs get low enough and lots of innovators get interested, experimentation eventually produces the right business model.

The question to me is: Who will that winner be?