Two years ago, Sean Carey, an expert in the subject of connected cars and telematics, made a prediction. The CEO of SCG Management Consultants said that the connected car would ultimately change the claims and repair industries in a profound way.
Fast forward two years and there has been a significant increase in the development of the connected car, with new entrants to the market such as Google and Apple, and the widespread use of Advanced Driver Assistance Systems (ADAS) and Mobility.
“There are significant disruptive forces taking effect with vehicle technology that will be prevalent as soon as 2020 that will change the market forever,” said Carey, during a Guild 21 webinar in September about the connected car. “While nobody can quite agree when the fully autonomous car will be on the market, it is profound change and it is going to happen faster than most expect. It’s here and it’s here to stay.”
While sharing information with attendees, Carey was 16 floors above the Connected Car Insurance USA 2016 conference in Chicago. The conference was attended by all of major insurance carriers and the majority, if not all of the large vehicle manufacturers.
Carey said that the claims/collisions market is currently in a state of being highly fragmented and somewhat dysfunctional, with insurers dominating the landscape and MSOs a significant barometer of the industry. As a result, it’s leaving the independent shops adrift and consumers are somewhat getting lost.
At the same time, vehicle technology is moving at a rapid pace requiring different repair methods and procedures and creating what he referred to as a “technology tsumanmi.”
“The connected car is connected to everything,” said Carey. Some of the capabilities he mentioned include:
• Car to Home/Work: Controlling homes from the car (turning on lights, HVAC)
• Car to Car: Real time traffic flow and incident alert, gaming/entertainment, and eco driving and coaching
• Car to Infrastructure: targeted advertising, tolls/metering and parking, vehicle recovery
• Convenient and Entertainment: social apps, streaming music, wifi hotspot and mobile wallet
• Traditional Telematics: diagnostic and vehicle health reports, hybrid navigation and concierge calls
• Cloud/B2B: data analytics
Carey said the connected car market has a 45 percent compound annual growth rate (CAGR). By the end of 2017, it is estimated there will be approximately 75 million connected vehicles on the road, 25 million of which will have an active user. In 2020, there will be an estimated 220 million connected vehicles on the road, 85 million of which will have active users using the connected car to communicate with outside sources. “That’s significant growth,” said Carey.
Carey talked to attendees about what he referred to as the “Road to Autonomous Vehicles” and the pathway to get there.
1) No Automation: The driver is control of all aspects of driving; there are no assistance systems;
2) Driver Assistance: May include warning systems such as lane departure warning, traffic sign recognition and rear parking sensors; driver is in control of remaining aspects of driving;
3) Partial Automation: There are one or more assistance systems for steering and accelerating/decelerating; driver is in control of remaining aspects of driving;
4) Conditional Automation: Vehicle is control of certain driving scenarios (e.g. highway); driver needs to be able to intervene on request;
5) High Automation: The vehicle is in control of driving; the driver needs to be able to intervene with lead time; and
6) Full automation: the car has full control; there is no driver—only passengers!
Currently, there are vehicles that exist with conditional automation. By 2021, Ford is expected to introduce a fully driverless vehicle to the market without a steering wheel or pedals for braking and acceleration.
Carey said the ADAS currently being used in some vehicles will be an indicator for the way the claims and collision repair sector will be affected. This incudes things like auto emergency braking, blind spot monitoring, lane departure warning and parking assist.
“All of these things are going to have a fairly dramatic impact on both the frequency of claims, the number of cars available to repair, and the severity of the claim, the cost necessary to repair them,” said Carey.
He also addressed how this will impact the accident rate, citing a study conducted by KMPG on Self Driving Cars – Automobile Insurance in the Era of Autonomous Vehicles. KMPG predicted that by 2040 there will be an 80 percent decline in terms of accident frequency per vehicle, compared to today. The average cost per claim (with all loss cost included) is projected to increase from approximately $15,000 in 2016 to $35,000 in 2040, which is a 2.5 times increase.
“Our belief is that the disruption to insurance carriers will be profound—with a select set of winners and a broader swath of potential losers,” said KMPG in its report. “As the way we drive and commute transforms, the amount, types and purchase of automobile insurance will be impacted. The disruption to insurers may be profound, and the change could happen faster than most expect.”
Carey said the changes are already taking place. In Illinois for example, there are plans to alter the toll roads, so semi-autonomous cars can have express lanes in the same way other cars do.
As part of KMPG’s research, insurance executives were asked which entities, other than insurance companies, did they think would be a major provider of vehicle insurance in the future. Fifty-eight percent believed Original Equipment Manufacturers (OEMs); 45 percent answered start-up companies, 39 percent thought established technology firms such as Google and Intel; and 32 percent said capital providers, including venture capital, private equity and other investment firms.
When asked which entities would “own” the data related to driverless vehicles, the majority of the respondents believed established technology firms (81 percent) and OEMS (71 percent) would be the primary “owners” of data related to driverless vehicles.
“The inclination and indication here is that executives at insurance companies believe the OEMs and the large technology firms will enter this space in a very big way,” said Carey. “I think the OEMS will leverage technology in areas such as First Notice of Loss (FNOL) through the connected car and we’re starting to see evidence of that.”
Earlier this year Toyota launched a new, U.S.-based telematics car insurance company, Toyota Insurance Management Solutions and more are expected to follow.
In order for collision repair shops to prepare for the changes ahead, Carey recommended repairers plan for a future where there are less repairs coming from a different source requiring higher and different skill levels and using different procedures, equipment and technology than today. “OEMs are at the forefront of creating this future and it’s making its way into the claims/repair segment,” said Carey. “If you’re not preparing for a different supply chain model, you should be.”
Stacey Phillips Ronak