Verizon Chasing Insurance Telematics Gold

Verizon Enterprise Solutions wants to put insurance companies in the driving seat when it comes to selling advanced in-car services to users, but may be facing an uphill battle to convince the industry to go its way.

Speaking at last week's Insurance Telematics event in Chicago, George Ayers, VP of global sales for Verizon Telematics, said that offering services such as automatic roadside assistance, vehicle location, driving diagnostics, geo-fencing, and automated maintenance enables insurers to develop deeper and more positive relationships with their customers. By contrast, Ayers said, UBI is just another form of price competition, in which insurance companies use telematics devices installed in vehicles -- often temporarily -- to deliver insurance price cuts to safer drivers.

Verizon Enterprise Solutions has competitive reasons for this thinking: With its acquisition of Hughes Telematics, Verizon added in-car devices to its technology stable, and would like to capitalize on those capabilities in the years before car manufacturers automatically install such gear in every new car -- a time that Ayers himself admits is coming within the next decade. (See Verizon Spends $612M for a Future in Cars.)

Both AT&T Inc. (NYSE: T) and Sprint Corp. (NYSE: S) are competing in the insurance telematics space as well, offering insurance companies a range of services from basic transport to logistics -- distribution and tracking of the in-car devices -- and data analytics. Both companies were exhibiting at the Insurance Telematics event. Every wireless carrier hopes to compete in providing wireless services to connected cars. But Verizon's $612 million investment in Hughes Telematics and its more aggressive marketing efforts signal a different level of ambition.

"Verizon is certainly focused more on this market than AT&T and Sprint," said Thilo Koslowski, VP of automotive vehicle ICT at Gartner Inc. :

From the after-market perspective, Verizon does have an opportunity to be more at the forefront in delivering services to the insurance industry. But I'm a healthy skeptic about whether consumers will expect their insurance companies to deliver these services -- I think they are more likely to expect these services from their car company.

Verizon is working that angle as well, Ayers said in an interview with Light Reading. Car dealers, in particular, are a target market because they stand to increase their share of car maintenance and repair revenue if they are providing the service that can remotely diagnose vehicle problems and, sometimes, even remotely fix those problems with software upgrades. Verizon can get them into that business quickly with its wireless services and in-car devices.

But Ayers sees the insurance industry as a near-term key, for as long as there are many cars on the road that aren't connected by their manufacturers, which will be for some time yet.

"As we wait for auto manufacturers to give connectivity to customers, insurers can step into the breach," he said. "Instead of paying for collision damage or being a backstop to issues I have as a customer, they can get out in front" and offer pro-active solutions to challenges both consumers and businesses face with their "fleets."

State Farm Insurance has already launched its Drive Safe and Save program, which uses In-Drive devices from Verizon Telematics, along with General Motors On-Star and Ford Sync factory-installed options. Subscribers get a five percent discount for enrolling and then can earn additional discounts for safe driving, as assessed by the on-board device. They can access driving reports for each enrolled car online. In addition, a device installed in the driver's visor enables one-touch access to emergency services or roadside assistance, as well as options for hands-free talking packages.

The potential for other services is considerable, said Ayers, including crash and alarm notification, stolen vehicle location, speech recognition, route assistance, concierge services, traffic, weather, friend finders, geo-fencing, a roadside assist toolbar and maintenance.

"There are various business models for any of these, but we know that consumers will pay extra for connected stuff," he said. Geo-fencing, for example, would send a text alert to the subscriber's phone when a teen driver or an aging parent driver takes the connected car outside expected boundaries.

By contrast, basic UBI doesn't establish an ongoing relationship but instead sets up a temporary ability for consumers to reduce their insurance cost and nothing else.

Roger Lanctot, assistant director of the Automotive Multimedia & Communications Service at Strategy Analytics Inc. , said insurance companies may not want to dramatically change the way they do business, but will likely have little choice. He said:

The relationship with consumers is changing, whether they admit it or not. The game has changed. Insurance companies are in the best position, because they have the most information about their customers. But change is threatening and they are hesitant – they have gotten into other businesses before and had a bad experience and gotten out.

For Verizon Enterprise Solutions, the telematics piece of the business is only one part of its efforts to get more deeply engaged with the insurance industry, said Stephen Busateri, global principal manager for insurance and finance.

"We can help them modernize the insurance value chain," he said. "Today it is all organized around claims. But we can help them understand their customers better, and do a better job of managing information and messages across multiple market channels -- the web, agents, retail stories, etc."

Succeeding at the kind of service Verizon wants the insurance companies to adopt will take a prolonged focus, said Gartner analyst Koslowski, and he isn't convinced that persistent will happen. He continued:

Their core business is still tied to that network and finding subscribers -- I have seen it a lot, where they get really hot on this topic and then if something happens on core business -- like 5G, for example, they seem to lose interest or focus on doing this well. They have to go up against companies that also try to be an ecosystem player, like the car companies or increasingly consumer electronics companies like Apple and Google. It will be interesting to see how they compete over the long term.

— Carol Wilson, Editor-at-Large, Light Reading

Carol Wilson 9/9/2013 | 5:00:41 PM
Pot calling kettle So a telecom giant, often accused of being too slow to change, is now tryng to change another industry...and catching some heat.
Sarah Thomas 9/9/2013 | 5:11:43 PM
UBI Sprint seems to be counting on the UBIs much more than Verizon. It's tying additional services them like text disablement when the car is in motion and trying to make reducing your driving score or improving the greenness of your ride into a socially networked gaming experience. Not sure if it'll be successful, but it's interesting that Verizon sees little future in the UBI.

Sprint Insures its Spot in the Connected Car: 

pdonegan67 9/10/2013 | 4:53:22 AM
Liability & Mobile Security: Where The Buck Stops This is where investment in network security transitions from being a cost that the operator has to bear to being a critical enabler that unlocks brand new revenue streams.

The operators won't themselves take legal liability for network security breeches in these telematics applications when they impact customers. It's the auto industry that will.

Hence the operators will find their network security strategies increasingly driven not by their own technical guys earnestly evaluating "what do we need to secure the network?" but by the legal folks in the auto industry demanding that anything and everything be done to bullet-proof the mobile network to minimize their liability in the event of law suits.

And they will demand that with precious little regard for the technical mertis of the case - "I don't care whether you think I need it or not, it's not your ass that's on the line. If there's a security box that can be ticked I want it ticked, period".

Over time, operators that want to lead in this market, and other verticals like it, will therefore be driven into a network security arms race: invest and win, don't invest and lose.
[email protected] 9/10/2013 | 6:40:03 AM
Re: Liability & Mobile Security: Where The Buck Stops Great points, Patrick.

It also highlights the need for service providers to have very distinct teams, strategies and investment plans for the specific vertials they are chasing -- Verizon does not want to look back in 5 years and think the Hughes acquisition was an expensive folly.
Carol Wilson 9/10/2013 | 10:00:13 AM
Re: Liability & Mobile Security: Where The Buck Stops Ray, I think Verizon is well aware of the need to understand the vertical - they have a lot going in the insurance vertical area and were in the process of developing their own telematics technology as part of the insurance industry strategy when they decided it made more sense to buy Hughes Telematics. 

But I do think you are right, there is a tendency in telecom for service providers to think they know what is best for an industry vertical without really understanding how that business works. 

Carol Wilson 9/10/2013 | 10:02:06 AM
Re: Liability & Mobile Security: Where The Buck Stops Patrick,

It's my understanding that the auto makers aren't sharing the information they are getting from the in-vehicle systems that are factory-installed with the insurance industry, in part for the reasons you describe. 

Do you think most mobile operators are aware of what the automakers will need and willing to step up and provide that bullet-proof security?
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