As electric vehicles become more affordable and ubiquitous, auto insurers must harness new underwriting capabilities and claims processes to not only encourage safer driving but also reward drivers for their existing safety habits. One tool that has been a game changer for auto insurers everywhere is telematics data. By using these real-time insights, insurance companies can track driving behaviors, accurately assess accidents and report claims, and provide better value for their customers.
At InsureTech Connect 2022, Andrew Rose, president of OnStar Insurance and executive vice president of GM Financial, spoke to McKinsey’s Tanguy Catlin about how telematics data have changed the insurance landscape and how companies should adapt to keep up with the industry’s future. The following transcript has been edited for clarity.
Tanguy Catlin: What has changed the most in the insurance industry over the past few years?
Andrew Rose: We saw credit come to bear in the early part of this century, and now the next big transformation is telematics data—how you operate a vehicle has become a bigger part of how insurance prices products. How can you make it more causal and less correlative? That’s where the future is.
Tanguy Catlin: You are in a unique position to talk about the power of data. What is available now, and how could it affect the way we’re pricing or managing claims?
Andrew Rose: I joined GM Financial [more than two] years ago, and I joined because of the data. Data has the opportunity to be transformative. For 25 years, we’ve been collecting data at OnStar. So we were a connected-vehicle manufacturer before there was such a term as a connected vehicle. Now we can bring that data to bear in insurance use cases, whether that be by segmenting and pricing products for customers, finding the best drivers and rewarding them for their performance, or finding drivers who need a bit of advice on how they can be better drivers and providing that to them. The data can also be transformative in the claims part of the process. We can know that an accident has occurred, understand automatically what parts are broken or if a vehicle is a total loss, and determine what kinds of injuries the individual may have. All those things are possible now as an OEM, and being an insurer inside of an OEM is exciting.
Tanguy Catlin: How much of that data are insurance carriers currently using for underwriting, pricing, or claims?
Andrew Rose: Very little. Most of those advances currently exist on a small subset of vehicles. The average manufacture date of a vehicle on the road today is 2011, which means there’s a lot of technology coming. As those vehicles bring that technology to the road, insurers can use the data. Right now it’s a small fraction of the vehicles on the road, but the future will be transformative.
Tanguy Catlin: What do you think the future of insurance will look like?
Andrew Rose: From a GM standpoint, hopefully the realization of our “zeros”: zero congestion, zero emissions, zero crashes. The more the vehicle can augment the driver’s ability to understand what’s happening on the road and be there to assist, the better. We want to take those ADAS [advanced driver-assistance systems] features to the next level. The liability considerations of who’s responsible for what when an accident does occur is an interesting point for insurers as well.
Tanguy Catlin: Today in insurance, we say you need to have a big brand. We say that you need to have distribution access. We say that you need to have data to underwrite the risk. Will that matter in the future? Will insurance be sold and used differently?
Andrew Rose: OEMs have an opportunity to participate in the insurance ecosystem in ways we haven’t had in the past. Our access, our understanding of the technology that’s coming for vehicles, and the data that comes from those vehicles afford us a unique opportunity to be part of the insurance equation going forward. Brands will still be important, but tightly intertwining the auto and auto insurance ecosystems could be a more relevant part of the future.
Tanguy Catlin: Are carriers the competitors or the partners? How should we think about the evolution of the ecosystems?
Andrew Rose: Both. We supply our data into the insurance ecosystem now as General Motors. We intend to continue to do that. We have zero crashes as our goal. From that standpoint, we want to reward good behavior on the road, whether someone’s insurance comes from OnStar Insurance or one of our competitors. I’d like to create a system within OnStar Insurance that expands the value and benefit of that data to the broader GM ecosystem. We think embedded, integrated insurance is the future.
Tanguy Catlin: To rethink pricing, it seems that we need to find a way to combine data from vehicles and how the driver is behaving with the claims data. Is this happening?
Andrew Rose: It is. It’s still in its infancy, but it’s getting better. We have an opportunity now to get more sophisticated telematics data. When an accident occurs, do I know what damage is done to the vehicle? I have a pretty good idea. I know the angle of that accident. I know the severity and the deceleration components. We know, from an OnStar standpoint, where people were sitting in the vehicle and who might be the most harmed. That information helps us prioritize first responders.
We also took it a step further in our Cruise business, an autonomous-vehicle company of which GM is the majority owner. Now we can have video evidence of an accident, so we know exactly what happened and there’s indisputable evidence. That will be the future for regular automobiles beyond the Cruise platform as well. But we’re not there yet.
Tanguy Catlin: We recently completed some analyses with many automakers and insurer partners. We observed that the old insurance—the one that’s based on credit ratings for cars that don’t have sensors—is no longer growing.
But there’s a new insurance that’s emerging for cars equipped with the technology you mentioned and for electric vehicles in general. We think that the market will grow three times faster than the old market was growing. What will define the winners and the losers in this small but fast-growing insurance market?
Andrew Rose: The companies that use and access the data will turn it into the strategic advantage that it can be. That will be the winner’s move. You can’t sit on the sidelines anymore and say, “It’s always worked; it will keep working.” It will work only for very old vehicles. Modern vehicles require modern insurance.
You have to embrace new technology. Traditional underwriting for older vehicles can still work, but we would argue that there’s an opportunity to use telematics to benefit older vehicles. But future vehicles require future insurance.