Tag Archives: Nissan

Car Makers, Insurers: Becoming Partners?

When “Car and Driver” magazine debuted more than 60 years ago (originally titled Sports Cars Illustrated), nobody could have envisioned the approaching changes that would transform life as we knew it – including all things automotive and consumer. Today, the expression “car and driver” suggests a completely different meaning as automobiles are becoming “driven” by software and technology and their owners are becoming passengers – and increasingly we are riding in vehicles we don’t even own but rather share or rent.

But while we await our future, current innovations in vehicle and consumer technologies have already emerged to create a transition period full of complex challenges and issues accompanied by potentially significant opportunities for all participants. While much attention is being paid to the emergence of telematics and the connected car, and seemingly endless amounts of investment capital are flowing to the many innovative and promising startups sprouting in this fertile global environment, something even more consequential is also beginning to evolve. Auto insurers and auto makers – once basically adversaries – are beginning to cooperate around many of the related opportunities.  

See also: 3 Technology Trends Worth Watching  

These two industries, which serve and share a common customer base, have traditionally been wary of one another because they had so many conflicting interests. Carriers insure the people who drive the cars that OEMs make, and, when accidents inevitably occur, liability is frequently brought into question to protect the interests of one from the other. In addition, franchised new car dealers, upon whose success OEMs depend for sales and vehicle distribution, earn significant revenues from selling a variety of related products and services – including warranties and insurance, another area of potential conflict. Finally, when insured vehicles end up in collision repair shops as a result of accidents (which happens more than 20 million times a year), insurance carriers do their best to manage repair costs by encouraging these shops to find and use less expensive parts, which costs OEMs and their franchised new car dealers significant parts sales revenues. And, at a higher level, insurers and OEMs value and fiercely protect their customer relationships and have no interest in sharing them with others.   

However, these dynamics are quickly changing as new mobile technologies are rapidly transforming consumer behavior and expectations and as new connected car and automated driver assist technologies begin to present significant new challenges as well as exciting opportunities to both auto insurers and OEMs. It is far from a given that today’s auto market share leaders will enjoy similar shares of future autonomous vehicle sales, and it is equally uncertain as to by whom and how these vehicles will be insured.

Tesla is positioning itself to do both. And so the ancient proverb that “the enemy of my enemy is my friend” seems to apply very well here. Evidence of insurer/OEM partnerships, both direct and indirect, is plentiful and growing daily.

Insurer/OEM connected car partnerships date back to as early as 2012 and include State Farm/Ford, Progressive/GM OnStar, Allstate/GM OnStar and Nissan/Liberty Mutual. In 2015, Ford conducted a “Data Driven Insurance” pilot program that provided participating drivers with their driver history for use in obtaining auto insurance. In 2017, GM OnStar began offering its subscribers 10% discounts on auto insurance from participating carriers including National General, 21st Century, Liberty Mutual, State Farm and Plymouth Rock.  

And data and analytics information providers Verisk and LexisNexis Risk Solutions, which collect data and analytics solutions for use by the insurance industry, have both recently launched telematics data exchanges with OEM participants including GM and Mitsubishi. Consenting connected-car owners have the option to contribute their driving data and seamlessly take advantage of insurers’ usage-based insurance (UBI) programs designed to reward them for how they drive.

Other innovative telematics data models include BMW CarData, which allows owners to share customized data with pre-approved third-parties such as insurers, auto repair shops and other automotive service providers. Drivers can obtain custom insurance coverage based on their exact number of miles driven while repair shops could automatically order parts in advance of service appointments.

For carriers, existing data pools and analytics tools will become less useful than real-time data streaming from connected cars coupled with increased proficiency in predictive modeling and machine learning. OEM/insurer partnerships can enable both parties to share the costs and co-develop big data mining technologies and advanced analytics methodologies to benefit their respective businesses. Insurers can improve underwriting and claims processes while OEMs can improve vehicle safety, design and performance.

Data provided by connected-car devices could be used to initiate claims processing, order damaged parts, triage required collision repair and manage other third-party services (e.g. towing, rental, appraisal) and record accident dynamics as well as occupant placement. OEM/insurer partnerships sharing this data could lead to better claims service and satisfaction and more reliable injury claim evaluation. OEMs could use this data to improve vehicle and occupant safety and could ensure that repairs are performed at properly certified collision repairers and that appropriate parts are used in the repair.

OEMs and insurers can partner to offer customers innovative customer experiences, becoming primary points of contact for risk prevention and new hybrid insurance products as well as dealer parts, service and sales opportunities. New revenue sources for both parties could include Intelligent GPS for theft recovery, real-time notifications of traffic and other travel inconveniences, intelligent parking, location-based services, safety and remote maintenance services. Cost duplication from currently overlapping services such as roadside assistance and towing could be eliminated by single-sourcing such services.

See also: The Evolution in Self-Driving Vehicles  

To be sure, other telematics data business models have emerged that could threaten OEM/insurer partnerships.  In June 2017, BMW and IBM announced the integration of the BMW CarData network with an IBM cloud computing platform that could help as many as 8.5 million German drivers who grant permission to diagnose and repair problems save on car insurance, and take advantage of other third-party services. IBM can also collect data from other OEMs over time, and BMW plans to expand the program to other markets. And technology companies, including Automatics Labs and Otonomo, are seeking consumer consent to sell data through their exchange platforms.

While we await the day that self-driving vehicles dominate our roadways – which will no doubt make many of these driver data initiatives basically irrelevant – we have the most pragmatic of all reasons why OEM/insurer partnerships make sense. Participants can mitigate their risk and reduce their investments in these costly but still relatively short-term opportunities as they position their companies for the as-yet-undefined future of transportation and insurance.

Autonomous Car Tech Reaches Mid-Market

As part of the 2016 edition of the Usage Based Insurance study, we analyzed the impact of autonomy on the insurance market. We forecast that 380 million semi-, highly or fully autonomous vehicles will be on the road by 2030.

This might sound like a lot, but then at the Consumer Electronics Show in Las Vegas we heard that new manufacturers are entering the race. Typically, we expect the luxury brands to foster the development of autonomous vehicles (AVs), with Mercedes, BMW and Tesla all topping the list of development activity. This time, however, it is the mid-market brands such as Nissan, Ford and GM that are making the announcements.

All three arrived at the show with news and partnerships up their sleeves as the competition grows ever more intense.

  • Nissan, in partnership with Renault, announced 10 vehicle models with autonomous capabilities on the road by 2020, with single-lane control from this year and rolling out multi-lane control intersections assistance from 2018 onward.
  • GM announced a $500 million investment in Uber rival Lyft, which GM says could lead to the development of a fleet of driverless cars, some available for hire, as well as a network of car rental stations. This announcement follows news regarding the development of GM’s self-driving version of the hybrid Chevrolet Volt.
  • Ford revealed an agreement with Amazon, aimed at linking cars with connected homes and the Internet of Things. Ford was also expected to announce a tie-up with Google, but that did not happen, possibly because of recent regulatory proposals limiting driverless vehicle testing in California. Instead, the car maker stated that it would triple the size of its Fusion Hybrid autonomous research fleet this year to 30. Ford will also integrate new solid-state lidar sensors that create real-time 3D models of the surrounding environment.

Although many autonomous functions, such as cruise and parking, are aimed at improving comfort, most of the development today is focused on safety and crash avoidance.

These capabilities will have a direct impact on the insurance industry a lot sooner than the driverless car. We analyzed and quantified that impact in the study to precisely estimate the share of accidents that could be avoided with the introduction of advanced driver assistance systems (ADAS).

For example, we concluded that frontal collision avoidance and cruise systems could reduce losses by as much as 50% (depending on the level of sophistication).

ADAS functions could therefore lead to a reduction in accidents of between 30% and 40%, with AVs beginning to have a significant impact in mature markets from 2023 onward. In the most advanced countries, such as Germany, premiums will decrease by as much as 40% between 2020 and 2030.

With the end of the statistical actuarial model also approaching, insurers will need to be acutely aware of the car technology evolution speed. The car without accident will be on the road long before the car without driver.

The 2016 edition of the UBI Global Study was launched last month; It covers the impact of ADAS on insurance premiums in details and with a market forecast up to 2030. You can download the free abstract here.

Effective Strategies for Buying Auto Insurance

Shopping for and eventually purchasing auto insurance is not the most enjoyable experience. It’s difficult because each state varies in terms of which specific types of coverage are required and which are not, i.e. luxury coverage. Even more trying is deciding which type of additional coverage you need. Most auto insurance companies profit from the sheer ignorance of the consumer. If you drive one of the 10 vehicles mentioned below, and you are paying quite a bit more than the upper limits, you have a solid case for changing policies. If you do not drive one of the 10 vehicles and are curious about how much you are paying versus what other auto insurers are willing to charge, compare auto insurance now!

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Data is derived from compare.com

The Dangers of Standing Still

One of the most telling episodes of Kodak’s slide into bankruptcy was how it incorporated digital capabilities into its Advantix camera system.

Kodak spent more than $500 million to develop and launch the Advantix in 1996. The system capitalized on emerging digital capabilities— especially the digital sensors that Kodak engineers had invented two decades earlier—to capture date, time, shutter speed and lighting conditions to produce better pictures. The strategy culminated in the Advantix Preview camera, which allowed photographers to preview shots and mark how many prints they wanted. Kodak gave users no ability to save the digital images, however. The Advantix required traditional silver halide film and prints.

Advantix flopped. Why buy a digital camera and still pay for film and prints? Kodak wrote off almost the entire cost of development.

Kodak’s strategic blunder was not because of a lack of technological prowess; it was because of an inability to embrace business model innovation. Kodak was the market-leading photo film, chemical and paper business. It bet its future on “the hope that demand for digital images would sell more film.” As a result, Kodak protected its traditional business to the bitter end—until others leveraged digital to make film irrelevant.

Judging from recent comments by Carlos Ghosn, Nissan’s chief executive, we might one day read about how Nissan repeated the pattern of Kodak’s decades-long blunder and demonstrated the dangers of standing still during a period of industry innovation (like what’s happening in insurance).

Ghosn has championed his company’s efforts to develop autonomous driving technologies to allow cars to operate without human intervention. And, unlike some other large automakers (such as Toyota), Ghosn does not dispute the technical feasibility of driverless cars.

But Ghosn views the choice of semi-autonomous vs. driverless as a strategic decision—and he is clear that his choice is to use autonomous technologies as incremental enhancements to cars with drivers. As reported by the Associated Press via the New York Times: Ghosn said Nissan sees autonomous vehicles as adding to driving pleasure, and a totally driverless car is not at the center of the automaker’s plans. The autonomous driving Nissan foresees will assist or enhance driving. Nissan may end up with a driverless car, but that was not the automaker’s goal, he said. “That is the car of the future. But the consumer is more conservative. That makes us cautious.”

In other words, Ghosn’s strategy is to hope that the demand for autonomous technologies will sell more cars. Like Kodak, he is aiming to reinforce Nissan’s current business model rather than embrace business model innovation.

By being cautious, however, Ghosn risks emulating Kodak’s failure by waiting for others to leverage driverless technologies to make traditional cars irrelevant. He also risks ceding emerging business innovations to Google, Uber and others willing to make driverless cars their explicit primary goal.

The unanswered question is whether Ghosn, behind the scenes, is parlaying his technological forward-mindedness into strategic preparedness.

Carlos Ghosn need not shed his caution. But, as I previously argued, trillions hang in the balance. Given those stakes, has Ghosn hedged Nissan’s strategic bets in case the driverless “car of the future” comes more quickly than he expects?

Some argue that, of course, Nissan won’t be caught flat-footed even if driverless cars come sooner than expected. Look, for example, at its research partnership with NASA. But research is not enough.

A trap that market-leading companies fall into is believing that they can catch up if their initially cautious strategies turn out to be wrong. One lesson that Paul Carroll and I found in our study of thousands of large company failures is that it is very hard to excise denial from multiple layers of the organization—even after objective evidence argues for doing so. Another lesson is that, while it is possible to catch up on raw technical expertise, it is hard to catch up after yielding multiple product-oriented learning cycles to competitors.

Take electric hybrid cars. A former senior technologist of one of the big automakers told me his company considered but rejected hybrid electric cars before Toyota launched the Prius. The automaker was at first dismissive of the Prius and then surprised by its market success. It did jump into the market with its own offering. But, the technologist bemoaned, it has not been able to catch up. With each model, Toyota gets further ahead. The company ceded too many learning cycles to Toyota.

The same could be happening with driverless cars.

Nissan espouses caution about driverless cars. Whatever research is going on in its labs is mostly hidden from the public (perhaps to not confuse the market or provide succor to competing strategies).

Google, on the other hand, will soon release 25 prototype driverless cars onto the streets of Mountain View, with plans to launch 75 more. Google’s self-driving cars have logged a collective 1.7 million miles and are adding about 10,000 miles per week, mostly on city streets. Google has not cracked all the issues involved with driverless cars. It has, however, created the ability to learn faster.

Kodak, as evidenced by its own tongue-in-cheek marketing video, ended up play “grab ass” for years with digital photography. Late attempts to “get serious” were too late. Even now, 40 years after Kodak engineer Steven Sasson invented the digital still camera, Kodak still struggles to realize the potential of its IP portfolio.

Likewise, every market-leading department retailer of the 1950s and ’60s, such as Macy’s, Woolworth’s and Ames, thought it could contend with discount retailers like Wal-Mart if the need arose.

Only Dayton Hudson took the discounting business model seriously. Rather than watch and wait, Dayton Hudson formed a discounting business unit and unleashed that subsidiary to compete as hard as possible against the traditional business. That discount subsidiary was named Target. Of the more than 300 department-store chains in the U.S. in the late 1950s, only Dayton Hudson/Target successfully moved into discount retailing. Most of the others preceded Kodak on the path to bankruptcy.

Rather than following in the footsteps of Kodak and all those defunct department stores, Nissan should be more like Dayton Hudson.

Instead of just betting on caution, Nissan should also unleash innovators to create its own driverless offering and charge them with competing as hard as possible against its traditional business.