I recently attended a telematics event in Brussels and had an interesting discussion about the future of on-board diagnostics (OBD) in auto insurance. I have been in the European telematics usage-based insurance (UBI) space for a long time and have seen all sorts of solutions adopted by insurers when launching programs to consumers: hidden black boxes, windscreen devices, battery-mounted devices and tags, all with different types of success.
I have rarely seen OBDs succeed. In theory, there are benefits from reading vehicle data and being connected to the car, but the reality has proven massively different.
First of all, OBDs prove to be inconvenient for consumers. Each vehicle has a different position for the port, and unless consumers are carefully guided they simply won’t find it. If they do, the ports can be in inconvenient places, which either makes the device an eyesore in the car or annoying because it can detach when the driver gets into and out of the car. Some less-expensive OBD models, without GPS and GSM, can be paired with phones, but even this experience has never been straightforward due to different Bluetooth standards. So the promise of self-installing really did not work out.
Car manufacturers don’t help the situation. They continuously update their vehicle software, which can cause compatibility problems for OBD makers every time a new model comes to market. Guess who discovers this first? Consumers.
OBDs proved to be inconvenient for insurers. When insurers launch a new UBI program, they want to make sure the data is standardized across all available vehicles. But with all their issues with compatibility and installation, OBDs in Europe have never been able to deliver the standardization that make the driving data interesting for insurers on a large scale.
See also: Advanced Telematics and AI
OBDs have had some success in countries like the U.S., mainly due to different OBD data standards, bigger cars and more consumer awareness. But even in the U.S., insurers are abandoning OBDs for smartphones, which can provide better customer experiences and adoption rates.
But perhaps most damaging of all, car makers are starting to limit access to the OBD port to protect consumers from hackers and bad experiences. Ultimately, the port has been created for diagnostics purposes years ago but lately used by hardware providers for different purposes. Organizations interested in accessing vehicle data will probably be driven by OEMs directly to access driving data from the cloud with highly secure access systems – not from the vehicle itself.
This is why we won’t see many insurers launching new OBD-based UBI programs.