GM announced this week that it will start selling policies directly to drivers through its new OnStar Insurance program. The company will start with its employees in Arizona and plans to expand to the general public by the end of 2021. This move has gotten some attention in mainstream sources like the Wall Street Journal.
The policies are underwritten by American Family Insurance affiliates and issued on its paper. In that sense, this partnership is an extension of the insurer/auto manufacturer data-sharing partnerships that have proliferated in recent years. Insurers have inked these deals to create a new way to collect driving data that’s easier for the driver than installing a device or downloading an app.
These deals have typically involved the original equipment manufacturers (OEMs) sharing driving data with the insurer, which can use it to score drivers and offer discounts. In GM’s case, it’s also been a marketing partner—you can head to OnStar.com and enter your state to find insurers that might offer you a discount if you’re a good driver.
What’s different about OnStar Insurance is that the OEM offers the policy under its own (subsidiary) brand, directly to the driver. It’s the logical extension of the relationship for both partners. For GM, it’s another way to monetize its data stream, which OEMs generally have trouble doing. AmFam gets additional marketing muscle and a new direct sales channel. This development was more of a “when” than an “if.”
Telematics is here to stay, but bullish mid-2010s projections for telematics adoption and growth haven’t materialized. OEM/insurer partnerships already had the potential to open up market space and reduce the barrier to entry; OEMs offering insurance directly to drivers may expand and accelerate this.
See also: The Evolution of Telematics Programs
How these policies are sold will be a significant factor. Most drivers opt into or out of OEM data sharing when they buy their vehicles; if these policies follow the same pattern, it will be on individual dealers to push the insurance offerings. On the other hand, it’s easy to imagine OnStar alerting a driver who’d agreed to share data but hadn’t bought OnStar Insurance that the drive could save X amount by switching.
User experience will also be a major determinant. GM currently plans to use OnStar to coach its drivers. That’s potentially a major plus, but only if the coaching is done well and the user experience (UX) is slick. Consumers have high expectations around digital experiences, and half-efforts won’t go over well.
Finally, one potential drawback: It looks like a major draw to OnStar Insurance will be price, which further cements the connection between telematics and discounts. Reward- and engagement-based telematics programs have been successful overseas, but they haven’t taken hold stateside. Anecdotally, insurers have told me that U.S. consumers expect upfront discounts as an incentive for enrollment in telematics-based insurance. Offerings like OnStar Insurance could further entrench the idea that telematics is all about exchanging data for money.
I recently published a report on telematics that covers these and other issues. Feel free to reach out to me with any questions!