Connected vehicle data is invaluable, but don’t forget the connected driver

It is an oft-debated analogy, but if data is in fact the new oil, the telematics industry is manning the rigs, operating the pipelines and refining the crude product. With the advent of the connected car, a number of players have emerged in the mobility sector hoping to turn vehicle data into safer roads, healthier vehicles, enhanced in-cabin experiences and new revenue streams.

Modern cars already generate huge amounts of data: according to the European Data Protection Supervisor, a new car typically has over 100 sensors, and generates as much as 25 gigabytes a day. The rise of highly assisted driving and autonomy will see further exponential increases, with sensors hoovering up information on their surroundings to train algorithms.

However, much of this is highly specific to the vehicle itself, and how it performs: what possibilities are there for a driver-focused approach, reliant on easily accessible devices such as smartphones, and how might this fit with an automaker’s connected car strategy?

Connecting the unconnected

Hari Balakrishnan is Founder and Chief Technology Officer at Cambridge Mobile Telematics (CMT), a Massachusetts-based software company specialising in telematics and analytics for usage-based insurance. As he affirms, the data that connected cars generate is creating opportunities for automakers which, if done right, could create net-new revenue, grow brand loyalty and increase customer lifetime value.

“The principal challenge,” he suggests, “is that about 90% of the vehicles on the road today are unconnected. In the US, the normal fleet turnover is about ten to 12 years, and so it’s going to take years for connected cars to dominate the market. What’s more, automakers are fighting an uphill battle today with connected car growth stalling due to chip shortages.” In addition, he says, owners are less connected than their vehicles—due to the lack of entitlements and customer permissions to deliver and use connected car data.

Mobile telematics therefore offers three big opportunities. Firstly, a smartphone or other IoT device can quickly connect the unconnected, allowing them to run data-driven software on their phone. In the case of usage-based insurance, the potential benefits are many: automakers can offer safe driving discounts, either through their own products or in partnership with insurers. In the event of a crash, connectivity opens up options for automatic emergency service response, or directions to a certified repairs centre.

“With mobile telematics,” explains Balakrishnan, “an automaker can use our platform, combined with scoring and approvals from US Departments of Insurance, to offer usage-based insurance to all customers, and not just those with a connected vehicle.”

The second big opportunity which mobile telematics gives automakers is the chance to enhance existing connectivity offers. For example, vehicle data can be fused with mobile phone data to create an altogether more holistic view of a driver’s performance.

“This master view of a driver enables an automaker to extend their connected car programmes beyond their brand to include every car in the garage,” says Balakrishnan. “For example, if a family of four has two cars, one connected and one unconnected, everyone in that family could get the benefits of being connected; either through the car itself, or through their phones.” In other words, the flexibility of mobile systems means that many more can benefit.

Auto insurers who adopted telematics early are benefitting, and laggards are being hurt

Finally, mobile telematics offers automakers a way to forge closer, on-going relationships with customers. This is a channel which, until now, has not been open to the incumbents, says Balakrishnan. The traditional relationship between customers and automakers ends after a trip to the dealership. After that, any insurance-based interactions—whether maintenance, emergency assistance or courtesy cars—are mainly with the auto insurer.

However, the challenge remains the same: 90% of vehicles on the road are not connected, and forging personalised relationships with these drivers would be extremely challenging. “Automakers can use mobile telematics to create a personalised communication channel with these customers,” he explains, by offering a range of insurance-related services.

Incentivising safety

Automakers and insurers can also rely on the efficacy of these systems, which could incentivise safer behaviours. According to the National Highway Traffic Safety Administration (NHTSA), distracted driving claimed 3,142 lives in the US in 2019, representing 8.7% of all fatalities. Worryingly, this was a 9.9% increase on 2018’s figure.

As Balakrishnan notes, 2020 was the deadliest year on the roads in over a decade despite fewer people driving due to the pandemic. Higher speeds and higher rates of distracted driving were among the primary reasons cited.

Mobile phone usage is a leading cause of behaviour which mobile telematics can quickly address. “Our technology can detect distracted driving behaviours, including handheld phone calls, hands-free phone calls, and active distraction like typing and swiping,” says Balakrishnan. “Distracted driving is the most predictive risk variable in auto insurance, and those insurers who don’t have it don’t understand a driver’s true risk.”

The combination of technology and incentives is a powerful one, says Balakrishnan, “Through an analysis of our Safest Driver contests, we’ve found that safe driving programmes have reduced distracted driving by 39%,” he says, and automakers could save thousands of lives on the road through pursuing these.

Where next?

For automakers, the big question around the connected vehicle has always been how to establish revenue streams and turn a burgeoning technology into a reliable profit pool. Confidence remains that the connected vehicle industry is set to boom, with McKinsey estimating connected car programmes will deliver US$400bn in annual incremental value by 2030.

But mobile telematics, says Balakrishnan, can deliver revenue today. “Insurance service providers like CMT”, he says, “have already developed advanced scoring capabilities ready-made for insurers that have been approved in most US states. What’s more, automakers can increase parts and service revenue by being the first to detect crashes and assist auto owners.” In addition, he adds, studies show that automakers can improve brand loyalty this way and bring more customers to their certified service centres.

The auto insurance industry, says Balakrishnan, has built up much experience in the field of mobile telematics, and has plenty to tell automakers on how to move forward. To begin, he suggests, speed is of the essence, and there is no reason to wait to begin collecting data: the same data will be the foundation of many future digital services, and the sooner they start learning how to collect and use it, the better off they’ll fare. “Auto insurers who adopted telematics early are benefitting,” he says, “and laggards are being hurt.”

Automakers can use mobile telematics to create a personalised communication channel with customers using non-connected vehicles

But don’t just go fast, he says: go big. “Customers love safety programmes,” he says, “and they love saving money on car insurance with UBI programmes and winning rewards for safe driving. They love feeling safe on the road with crash detection and emergency response. We can see the strength of consumer demand with companies like ADT, Verizon and Farmers offering such safety packages.”

Finally, he says, automakers should use all data sources: the fusion of data from connected vehicles, smartphones and IoT devices provides the broadest range of customers and services. Introducing smartphone programmes can accelerate mobile app adoption, opening up new customer communication channels. “The usage levels and use cases for each data source may shift over time,” he says, “but the future of transportation won’t be based on a single data source.”

The connected vehicle is an ongoing project, he concludes, with automakers requiring time yet to build vehicles which can efficiently digest data from across various sources, and fuse it to create a single, intuitive experience for customers. Those who master the collecting, processing and creation of “delightful” experience with driving data will find themselves in a strong position moving forward.