Emerging Vehicle Technologies - Finity Personal Lines Pricing and Portfolio Management Seminar 11 April 2013 - Finity Consulting
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Emerging Vehicle Technologies Finity Personal Lines Pricing and Portfolio Management Seminar 11 April 2013 © 2013 Finity Consulting Pty Limited
Presentation Outline
Emerging vehicle safety technologies
Re-format
• What are they?
• Potential impact
• Current market practice
• How long before these are widespread
Telematics
• Background and short history
• Benefits, challenges and business case
• Potential early adopters
Emerging Vehicle (Safety) Technologies
Forward Collision
Lane change warning
Tire-pressure avoidance Rollover prevention /
(blind-spot
monitoring technology (with mitigation
detection)
automatic braking)
Lane-departure Adaptive headlights
warning and Drowsy driver alert (cornering Smart headlights
prevention headlights)
Electronic stability Emergency response
control systems
3
Forward Collision Avoidance Technology
(FCAT)
4
Volvo Collision Avoidance with Emergency
Braking System
5
Forward Collision Avoidance Technology
(FCAT)
Currently Available
• Higher end manufacturers
• Volvo, Audi, Subaru, Lexus, Mercedes & Infiniti
• Standard or optional
• Effective operation at higher speed: Volvo (50-
70 km/h), Mercedes 200km/h
• Pedestrian Detection
Under Development • Backup collision intervention
• Collision avoidance using vehicle to vehicle
communication
6
Lane Change (Blind Spot) Warning 7
Lane Departure Warning & Prevention 8
Lane Change / Lane Departure Warning
and Prevention
Currently Available
• Higher end / European manufacturers
• Mercedes-Benz, Audi, BMW, HSV, Volkswagen,
Volvo, Porsche, Range Rover
• Standard or optional (majority)
• Intersection assistance
• Vehicle to vehicle communication technology
Under Development
9
Adaptive (Cornering) Headlights 10
Adaptive (Cornering) Headlights
Currently Available
• Higher end manufacturers
• Audi, Mercedes-Benz, BMW, Lexus, Acura,
Infiniti, Volkswagen, Citroen
• Mostly optional
• Adaptive brake lights
• Single-source fibre-optic lights
Under Development • Laser based headlights
• Infrared headlights (night vision)
• Self-levelling system (keeping lights on road when
driving over a bump)
11Some Studies show Technologies may
Reduce Accidents
Research
Technology Research Impact Research Source
Basis
Volvo XC60 vs.
Collision 20-30% lower IIHS Status Report, US Insurance
other mid-size
Avoidance PD claims cost 2011 claims data
luxury SUV
10-14% lower
Collision Vehicles where IIHS Status Report, US Insurance
PD claim
Avoidance FCAT is optional 2012 claims data
frequency
Centre for
Simulation 30 – 50% of all
Collision Automotive Safety NSW crash
based on injury injuries may be
Avoidance Research (Uni records
crash data prevented
Adelaide), 2012
Vehicles where
Adaptive adaptive 5-10% lower PD IIHS Status Report, US Insurance
headlights headlights are frequency 2012 claims data
optional
12Effectiveness influenced by driver
response
May generate false alarms
Less reliable on lower quality roads, poor weather or night
time
May be switched off
Risk compensation: Driver complacency or increase risk-taking
1320% Premium Reductions for FCAT?
"This is set to be reflected in our Insurance Australia Group -
pricing, and we would estimate including NRMA, SGIO and CGU -
that the cost of an insurance and Allianz support City Safety
premium for this vehicle will up with a 20 per cent reduction on
to 20 per cent cheaper than it insurance premiums.
would be if it didn't have the Volvo Australia spokesman Oliver Peagam
technology.“
(NRMA's research director Robert McDonald )
The benefits of Subaru’s EyeSight™ driver
assist system have been acknowledged
with a 20 per cent premium reduction on
Comprehensive Motor Insurance by
Allianz Australia.
http://subaru.com.au/news/eyesight-improves-20-cent-allianz
14Premium Relativity: FCAT vs. No FCAT
1.2
Premium Relativity (Premium model/Base)
1
0.8
0.6
0.4
0.2
0
GIO AAMI IAG Allianz
Volvo XC70 vs XC90 Subaru Liberty 2.5i Premium vs 2.5i Subaru Outback 2.5i Premium vs 2.5i
15Optional FCAT – Audi A6 16
Optional Lane Change / Departure – Volvo XC60 17
Vehicle Book Comparison
Glasses Redbook JATO
Explicit data fields
Features and Options Features and Options (flagged as standard,
Data structure
codes codes optional or not
available)
Yes, including separate
fields for features
Collision Avoidance No No (tighten seat belt,
warning light, brake
assist etc.)
Lane Change Warning Yes Yes No
Lane Departure
Yes No Yes
Warning
Adaptive Headlights No No Yes
18New ‘premium’ safety technologies quickly
become a standard feature of cars
Progression of Technology Implementation
100%
90%
Proportion of New Vehicles With Technology as Standard
80%
70%
60%
50%
40%
30%
20%
10%
0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Year of Manufacture
Airbags ABS Brake Assist Electronic Stability Control
19Forward
Collision
Warning
Automatic Blind Spot
Parking Monitor
2013 Holden
VF SS-V
Series
Commodore
Rear Lane
Traffic Departure
Alert Warning
21Vehicle to Vehicle communication
Exchange • Vehicle velocity
info with • Acceleration
nearby • Position
vehicles
• Heading
• Activate collision
Enhance avoidance
current • Intersection assistance
technologies • Lane change warning /
mitigation
Enables • Crash-less car
future
technologies • Self-drive car
22Telematics
What is Telematics?
The basic infrastructure behind an insurance telematics system
24A (very) Short History
No. products
growing : AA, Co-
1st Generation UBI Real PAYD Op, State Farm, First Australian
products, patented Insurethebox comp motor
by Progressive telematics product?
1998 2000 2002 2004 2006 2008 2010 2012
2013
‘Pay-per-km’ style
products grow in 2nd Generation UBI products.
popularity US /
Europe / South Progressive launches Snapshot
25 Africa (now ~1m policies)What’s in the box?
GPS
Accelerometer
Gyroscope
Modem
Sim Card
Depends on the technology solution – doesn’t all have to be in the
box – can utilise mobile phone, on-board computerKey Rating Factors / Enabler
Accelerometer Acceleration / Braking
Gyroscope Cornering Speed
Distance Driven
GPS Speed (by road type)
Time of Day
27Benefits of Telematics
Lower Claims Cost Base
- Selection
- Driver behaviour
Retention & Cross-Selling
- Price positioning
- Customer engagement
Claims Handling & Fraud
- Location, time of day
- Fault determination
Ancillary
- Roadside assistance
- Petrol prices, parking
- Targeted marketingAustralia is Different
US and UK comprehensive policies cover both
bodily injury and property damage
Market issues especially in UK
Aggregators
Prohibitively high premiums for young
drivers
21 year old driver in London:
Ford Focus 2006 – from £2,650 (£2,200
with a box)
Holden Commodore GTX – from £6,500
“Gender Directive” in EU
29Segmentation Benefit Source: Market Finesse Source: Progressive
Pricing Dynamics 32
Pricing Dynamics 33
Some Key Drivers
“Lift” from additional factors
Decrease in cost from improvement in driver behaviour
Discount Required to Install Telematics
Portfolio mix – “selection” Device
Over 20%
Quantum of discounts / loadings
Required Discount
16% - 20%
Premium size
11% - 15%
Cost of device and infrastructure
6% - 10%
Potential market size
1% - 5%
0% 10% 20% 30% 40% 50%
34 Source: ProgressiveChallenges
Product Design
Privacy and Data Ownership
Pricing
Technology and Infrastructure
Analytical Capabilities
35Progressive were one of the trailblazers of
insurance telematics in the early 2000’s -
available in 42 states across the US
6-week monitoring period – no ongoing
monitoring
Utilises OBDII port - Device installed by
the user, delivered in post
No GPS. Not based on location or
speed - Rating on acceleration /
braking, distance, time of day
Premiums only adjusted downward,
maximum 30% discount.
36Smartbox
Collaborative product with a panel of
underwriters – CoverBox provides the
technology
Assessed every 90 days, initial
discount of 25%
Device installed by technician
Online ‘dashboard’ to view behaviour
– updated daily
60% policyholders log on 3 or more
time a week
37“The UK’s Leading Telematics Insurer” –
Insurethebox website
Device installed by a technician –
behind the dashboard
No installation cost – they will come
to you
Gives away free miles rather than $
discounts
Claims 95% receive a discount on
renewal – average discount £601
Online ‘portal’ to view driving
statistics
38Potential Early Adopters
Coles
The South Africans
Motor clubs
Allianz
39Price Positioning in NSW
Coles is significantly more expensive for younger drivers and
40 parts of western SydneyThe South Africans
Hollard – “Pay-as-you-Drive”
~R60 (A$6) per month for device – provides distance and
behaviour summary statistics for the user
Real Insurance in Oz
Woolworths Insurance
Outsurance – “Safe_Driver@Out”
Behaviour monitored through out the year and considered
at next renewal
Maximum of 20% discount based on the experience
YOUI in OzMotor Clubs Different financial imperatives to big listed Seeking to maximise reach Need to remain relevant to young driver segment Good alignment with road safety advocacy position Offer range of aligned services eg roadside assistance, petrol pricing
Telematics technology in over 80,000
vehicles across 9 countries – primarily
Europe
A global telematics strategy – personal
and commercial lines
Allianz has a dedicated Telematics
division to explore global opportunities
Italy (2012)
Self-installed, OBDII
technology
Roadside assistance
~7% market share in the Australian
marketConclusions
Big changes afoot
Australian insurers slow to move
Coming
quicker than Some challenges involved
Pricing new
you might technologies Game changers?
think? Clearly
Telematics surmountable
Potentially large impact on
product design and pricing
Bigger incumbents will be slow
to moveDistribution & Use Reliances & Limitations
This presentation has been prepared for the Finity Consulting Finity wishes it to be understood that the information presented at
Personal Lines Pricing & Portfolio Management Seminar, held on 11 the seminar is of a general nature and does not constitute actuarial
April 2013. It is not intended, nor necessarily suitable, for any other advice or investment advice. While Finity has taken reasonable
purpose. care in compiling the information presented, Finity does not warrant
that the information provided is relevant to a particular reader’s
Third parties should recognise that the furnishing of this presentation situation, specific objectives or needs.
is not a substitute for their own due diligence and should place no
reliance on this presentation or the data contained herein which Finity does not have any responsibility to any attendee at the
would result in the creation of any duty or liability by Finity to the conference or to any other party arising from the content of this
third party. presentation. Before acting on any information provided by Finity in
this presentation, readers should consider their own circumstances
and their need for advice on the subject – Finity would be pleased to
assist.Contact
Nelson Henwood
Principal
Tel: +61 2 8252 3460
Mobile: +61 0438 656 341
www.finity.com.au
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