In 2018, the Internet of Things (IoT) market in Italy reached 5 billion euros, an increase of +35% compared to 2017. More than half of IoT turnover continues to be generated by gas and electricity meters and connected cars. The Smart Car gives satisfaction, with a market just over one billion euros (21%, +37% compared to 2017), and can count on 14 million vehicles connected at the end of 2018, more than a third of the circulating fleet in Italy.
GPS/GPRS boxes for the localization and recording of driving parameters with insurance nality prevail in terms of diffusion (69%, +14% in 2018), on the market for many years now, but the growth is mainly driven by natively connected cars (31%, +69% in 2018): 70% of vehicles registered in 2018 are equipped with a connection system via SIM or Bluetooth since the production phase. On the other hand, we find Smart Logistics solutions to support transport (465 million euros, +29%), used for the management of the company’s octets and satellite anti-theft devices (in 2018 there were 1.5 million goods transport vehicles connected via SIM).
The trend and factors influencing the market
The Internet of Things Observatory of the Politecnico di Milano claims that the connected car market will continue to grow and be one of the pillars of IoT growth in Italy, also because some factors play in its favour. For example, the entry into force – in March 2018 – of the eCall regulatory obligation will bear fruit in the coming years because it concerns new type-approvals and not just the simple registration of vehicles already on the market. Moreover, all car manufacturers feel safer in this market by now as they can count on the hardware component already installed in the production phase and are able to rely on connectivity enabled services as a competitive differential, an important factor in a very mature market like the car one: preventive/predictive maintenance based on component monitoring, provision of advice to reduce fuel consumption, possibility to manage the opening or temperature regulation of the car remotely are some examples of the services offered.
Indeed, from the consumer’s point of view, the proposal of innovative services, linked to connectivity, in the car sector is much clearer to understand, contrary to what happens in the smart home sector, where many services still do not have, or are not perceived as real value by people.
We add, moreover, that other legal provisions could also influence the sector, as we have said in this article, the black box itself could become mandatory by 2022 throughout Europe: the objective is to make the roads safer, but it is clear that the black box is a device that lends itself to multiple uses.
For the Observatory, a further stimulus to innovation will be given in the coming months by the increasing integration of smart speakers in cars, allowing users to interact with the car through voice. In this area, the role of big tech will be decisive (as has also happened in the smart home market): Amazon is focusing on the use of a physical device, Echo Auto, which can be purchased and installed on cars already in circulation and which is gradually starting to be integrated in some countries in different car models. Similar strategy for Google, which is also exploring the path of integration with devices and assets with which the car interacts, such as charging columns for electric cars. The self-driving car can wait for the moment: we are still in an experimental phase and in Italy only Modena and Turin are among the first cities that, during 2018, have allowed companies to start testing these solutions in Italy too.
The ‘smart car’ opportunity for the insurance market
For the insurance industry, the growth of the smart car market is good news, and the time has come to think about new services and new policy models: connected car means “data” and data provides new elements for the definition of risk, prices, business models. It is no coincidence that some of the main cases of successful insurtech startups, such as Metromile and Cuvva, are just disruptors of auto policies.
According to McKinsey, the increase in applications for the connected car is creating a completely new digital ecosystem around the car, which includes not only automotive OEMs, but also telecommunications operators, sensor and chip manufacturers, operators of digital platforms such as Uber, research institutes, standardization centers and, of course, insurers.
Connected cars allow the Companies a more precise determination of risks. Motor insurers, for example, have always relied on indirect indicators, such as a driver’s age, address and solvency, to determine premiums. Data on driver behaviour and vehicle use, such as driving speed and night-time driving frequency, are now available.
Another positive aspect is that the connected cars allow insurers to interact more frequently with their customers and to offer new services based on the data collected. Currently, often the only touchpoint in the relationship with the insured is represented by agents or brokers and limited to the time of contract renewal and claim handling.
But that’s not all. Although many features in the connected car are designed to reduce the frequency of claims, all the technology in the vehicle, such as sensors, will increase the average amount of claims due to the high repair costs, says McKinsey. A risk that could induce Companies to increase premiums: but already here, a more scrupulous differentiation between high and low risk customers allowed by the additional data obtained from the new ecosystem, allows a greater personalization of the ‘meritocratic’ policy on the basis of profiling without increasing the rates for high risk drivers. In addition, Companies can find new ways to compensate for ‘loss’ by reducing claims expenditure through optimised risk selection: through more effective fraud prevention, increased use of allied repair shops and the provision of smart service and support, such as alerting drivers to necessary maintenance or identifying smart parking solutions. Insurers can also sell their data and analysis solutions to third parties, such as media agencies that focus on location-based advertising.
In short, the hardware technology is there: the game is all about how to use it, creating value and smart services.All rights reserved