Despite a rollercoaster of a year, automakers and tech companies continue to make investments in four key auto-industry megatrends: Autonomous, Connected, Electric, and Shared (ACES). Connected cars and advancements made to usher in autonomous driving offer will infiltrate the market first, as OEMs compete to offer differentiated experiences to their drivers.
The connected car sector will be responsible for 30 million new connected vehicles on the road this year despite shipments of vehicles with embedded connectivity dropping by 15 percent in response to COVID. In the USA, 91 percent of new vehicles sold in 2020 will be connected. Both embedded and aftermarket segments will see accelerated growth in 2021, and sales should return to trend in early 2022 with 115 million global connected car shipments, and a market value of $83 billion in 2025.
Similarly, the global Advanced Driver Assistance Systems (ADAS) – embedded vehicle technology that improves driver comfort and safety – market is projected to be worth $270 billion by 2030 as drivers purchase more luxury vehicles and show strong interest in safety features. Even with differing traffic patterns and riskier driving during the peak of US shelter-in-place orders, ADAS had a profound impact on reducing accident severity.
Safety and other personalized experiences are influencing new car purchase behaviors. A 2019 survey by Fundera noted that 80 percent of U.S. drivers would pay more for a vehicle if it was accompanied by a better experience. By enabling safer experiences and delivering potential insurance premium savings, telematics and ADAS are the forces behind the driving experiences of the future.
Connecting OEMs and Drivers for Better Journeys
The relationship between OEM and drivers no longer stops at the point of purchase; it now extends beyond the vehicle itself. In the event of an auto accident, connected vehicles can automatically alert OEMs of the incident, triggering a series of services designed to help a driver in the time they need it most.
Associated technology and services exist that can help guide drivers once safe to quickly document the accident scene and initiate the claims process with their insurance provider through a singular, mobile experience. The technology can even guide drivers to select a local body shop to complete repairs where onsite diagnostics scans at repair facilities offer a thorough view of needed vehicle repairs, further optimizing the repair process.
Providing drivers with support during a confusing and stressful time can help OEMs distinguish themselves with unique services that drive customer satisfaction and even brand loyalty. Take, for example, the scenario of a total loss. According to CCC’s research, 34% of drivers are likely to select a new make and model when replacing their vehicle after an accident. And with 20 percent of all accidents resulting in a total loss, there is a substantial opportunity to retain customers. With telematics, OEMs can understand in near real-time that an accident occurred and that the crash dynamics signal a potential total loss, offering an opportunity to reach out to drivers with personalized support and offers to keep them in the OEM family. This new interaction with customers extends the OEM engagement in a way not previously possible before the rise of connected vehicles.
However, as the industry builds toward autonomous vehicles, the goal is to reduce, or even eliminate, accidents from happening in the first place. While we’re not there yet, ADAS technology has been shown to be very effective at reducing crashes in the scenarios in which they are best designed to work. Our recent analysis of the Delta V – the change in velocity that a vehicle experiences during a collision – indicates that ADAS in newer vehicles are mitigating the severity of accidents that cannot be avoided. However, most vehicles on the road are still not ADAS-equipped, and the technology doesn’t address every type of accident scenario.
As ADAS technology becomes standard on many vehicles, and consumers like the added safety these systems offer, insurance carriers are starting to factor in vehicle technology and accident-avoidance features when calculating rates. This change in underwriting inputs could lead to savings for all parties down the road.
Evolving Customer Expectations Open New Savings Opportunities
ADAS isn’t the only vehicle technology providing a savings opportunity either. As consumers have spent less time commuting over the last six months, it’s no surprise that usage-based insurance is starting to gain more interest. Many consumers are questioning the structure and pricing of their insurance policies that are based on the ownership of the vehicle, but not the use of the vehicle. As usage for many remains low, pay-as-you-drive and other alternative pricing models offer interesting alternatives.
In fact, according to Berg Insights, the total number of insurance telematics policies in force in North America is forecasted to increase from an estimated 14.7 million policies at the end of 2019 to reach 53.6 million policies by 2024, achieving a compound annual growth rate of nearly 30 percent.
Through telematics, OEMs can be a gateway to insurers, extending personalized driving experiences to a new phase of vehicle ownership. And just like the connected claims scenario, engaging drivers beyond the initial purchase offers OEMs the opportunity to provide unique experiences that build deeper relationship with their customers.
With driver consent, telematics-enabled insurance programs connect vehicles from the OEM point of purchase to CCC to participating insurers who may offer personalized insurance rates or reward good behaviors.
Driving into the Future
Vehicle technology provides a platform for expanded relationships. Consumers’ expectations for goods and services to be tailored to their specific needs continues to grow. The more attuned companies are to these demands, the deeper the customer relationship becomes. And when satisfaction is high, loyalty grows.
Learn more about CCC’s telematics solutions for OEMs.