From telematics to connected insurance [Interview with DriveQuant]

This interview is brought to you in partnership with DriveQuant, a company operating its the telematics and connected insurance space, across Europe.

I'm thrilled to have the opportunity to speak with its CEO, Philippe Moulin, who will enlighten us today on what telematics is and why we should probably talk about "connected insurance". He will also outline the latest developments in this field and how this technology can benefit car insurers who adopt it.

In a second episode, we will delve more specifically into DriveQuant's offering, its technological differentiation, and the ROI achieved by its insurer clients in Europe.

You can check DriveQuant's LinkedIn profile to learn more about their solution.

_

For French ???? speakers, you can listen to that discussion:

• On Spotify or Apple Podcast
• On Youtube

_

Introduction

Florian Graillot - Hi Philippe! Thank you very much for being with us today, and before we start, could you briefly introduce yourself for those who may not already know you? The idea is to get an overview of your background and your current role at DriveQuant to shed light on what you'll be sharing with us later on the topic of the day, namely telematics.

Philippe Moulin - Hello Florian, my background is very technical. I studied engineering at the école des Mines and have a PhD in applied mathematics. I worked for quite some time in the automotive sector. I started out a bit with car manufacturers, a bit with technology-oriented suppliers, and then spent quite a long time at a research center called IFP Energies Nouvelles, where I was constantly involved in the design and development of algorithms for the automotive world.

While at IFP, in 2017, I founded the company DriveQuant based on technologies we had developed while looking into topics related to connected vehicles. We believed there were opportunities around leveraging vehicle data. So we created DriveQuant around a driving data processing platform in 2017. And since then, I've been leading the company.

The basics of telematics

As you've understood, in this interview, we're going to take a closer look at telematics. Because ultimately, I have the impression that it's talked about a lot, opinions are often divided on the subject, and yet it's still quite unknown when you delve into it. Similarly, some recent technological advances seem capable of shaking up this ecosystem. So we're going to shed some light on all of this with you, Philippe. And first things first, could you share with us your definition of telematics?

I'm not sure if I have a definition. Telematics is the combination of computer science and telecommunications. As far as we're concerned, in the insurance industry, when we talk about telematics insurance, we often refer to car insurance. We're talking about the use of driving data for insurance purposes, often for pricing needs.

We're talking about projects where we use driving data to vary the insurance premium. We base the calculation of the insurance premium on indicators such as harsh acceleration, harsh braking, dangerous turns, sometimes excessive speed in countries where it's allowed. In fact, it's a bit of a caricature in my opinion.

Nowadays, we still see services with broader added value than just pricing. For telematics programs, there's a very strong prevention aspect. And then, we can use the data to detect impacts or accidents and use this information for assistance or claims management. So in fact, all the insurance value chain can be impacted.

It seems to me that we use the term "telematics" less and that we are increasingly using the term "connected insurance." And we see some very successful insurance programs in the US or in South Africa (I'm thinking of Discovery).

There are examples of what insurers can do with connected vehicle data, driving data, to extract maximum value in all the insurance value chain: prevention, pricing, assistance.

Tech solutions

And precisely, if we come back to the technological aspect, we surely all have in mind the beginnings of the theme with the need to have a dedicated device - a kind of dongle - with all the challenges it poses for a startup, whether to manufacture it itself or use an off-the-shelf product. Since we all carry a smartphone with us now, we can imagine that it could eventually replace these famous dongles. In any case, one of the major challenges is obviously the data. Could you enlighten us on the different technical solutions used over the years to enable telematics?

• Dongles

To my knowledge, the first telematics insurance programs used additional devices, what we call connected boxes, more like black boxes.

Insurers and policyholders don't necessarily have access to the data that will be collected, which tends to be more about events or somewhat macroscopic indicators. This type of technology, to me, is still typically used in a country where telematics insurance is very developed, such as Italy.

Black boxes can be used for things like recovering stolen vehicles. In this case, the boxes are really concealed in the vehicle. The drawback of these solutions is the cost. Firstly, the cost of the technology itself, the box, and then the cost of installation. So these are solutions that will only be relevant in markets or niches where the insurance premium is high enough to offset these costs. This is far from being the case in all markets.

• OBD devices

Then, there are solutions called OBD boxes that were used at one point. These are lighter solutions that use the OBD ports found in vehicles but were originally developed for diagnostics, mainly for repair needs. So it's a diversion of an existing technology. Manufacturers aren't very happy that they're being used for other purposes.

Technically, these solutions are quite difficult to implement. Often, OBD boxes are not compatible with all brands, sometimes not with all models. It's not always easy to find the location of the OBD port. And it's not very ergonomic to have an OBD box plugged in while driving. So there are quite a few drawbacks. It's a bit cheaper, and above all, it allows the policyholder to plug in the box themselves. There are still a number of disadvantages that make it difficult for projects to deploy. So it's not a solution that has been very sustainable.

• Smartphones

And now indeed, the technology that is taking over is smartphone technology.

We have a smartphone in every vehicle today, everywhere in the world, so in all markets. It's a solution that is easy to deploy and not expensive from a deployment standpoint.

With a smartphone, we have very good quality data and tracking of the person, really the person's behavior. We can collect data on distractions, such as smartphone use while driving, which is quite important for everything related to road safety today.

If necessary, these solutions can be complemented by very simple beacon-type boxes, just a Bluetooth transmitter that can contain an accelerometer or not.

There is a compromise to be found between the cost of the solution, the ease of implementation, which also indirectly incurs a cost, and the market we are targeting.

So, in some niches, some markets, we can afford to have more expensive solutions, but from a general point of view, if we are looking for deployments on a very large scale, we need to aim for solutions that are easy to deploy and not very expensive.

Business models

It's interesting to compare geographies as you do. You mentioned Italy, which is a particularly active market in telematics. And then, it's also interesting the advantages and disadvantages you listed regarding the use of smartphones, to which other connected accessories can also be associated. So, that was more the technological part, enabling data generation. From the customer's point of view, there's another element that comes to mind, it seems to me, it's the different business models. I'm obviously thinking of pay as you drive, pay how you drive, pay when you drive. How are these models different? And are they all about telematics? Or is the business model of telematics - or connected insurance, to use your terms - ultimately different?

Solutions like pay as you drive, so it's kilometer-based pricing, have been around for quite some time. It doesn't necessarily require telematics. However, telematics makes these offers easier to deploy and opens up new opportunities.

In general, this type of offer is coupled with prevention solutions. So, the preventive aspect is always very important. It allows playing on both pricing and risk reduction.

Pay how you drive is about behavior. Pay when you drive is about duration-based insurance. For everything behavioral, it's necessary to have access to data, for others, not necessarily. Telematics programs that include a pricing component will use one of these pricing methods, but coupled with prevention. Because it doesn't necessarily make sense to collect data without using it to help the driver as well. And that's the insurer's role, to better assess the risk more precisely by collecting data but also to help the policyholder reduce their risk.

The future of connected insurance ?

And to conclude the discussion on the challenges of telematics, there were three changes at play in the market that seemed to me to be opportunities, or at least trends that could have an impact on telematics. So I wanted to submit them to you to see if they were indeed market opportunities, or if it was just a view from my mind.

Trend 1 : car sharing

The first one that seems to me to be able to impact the future of connected insurance is the shift from ownership to usage and sharing of vehicles. How do you see the impact of this market change?

These are avenues that seemed interesting to us, especially in terms of the sharing economy. Because it makes sense when sharing a vehicle to ensure that the vehicle is being used properly.

So within the framework of a mobility service with peer-to-peer rentals or even carpooling, there are things that exist today regarding information sharing and reassurance between individuals.

But I think there are long-term opportunities. Clearly, when lending out one's vehicle, it's interesting to know that it's being used carefully.

Trend 2: SME fleet management

The second trend I wanted to submit to you is the role of fleets, especially for SME. It may be easier to install information generation elements. Or, in any case, the end user may be more likely to accept data sharing since it's mandated by their employer. How do you see this second trend?

Regarding fleet insurance, we see a lot of initiatives. Everything related to prevention is very relevant in a fleet context. For prevention to be effective, there needs to be an incentive. In the context of a fleet where there may be a manager supervising or encouraging drivers to improve, to be careful, every time we've had the opportunity to do so on client projects, we've had good results.

On these subjects, data sharing and service digitalization seem to me to be obvious.

Trend 3: connected vehicles

And the third trend I wanted to discuss with you is obviously about data, as vehicles are becoming increasingly connected and they obviously generate data that could be useful, in my opinion, for telematics or connected insurance operators. We saw this in the US with Tesla launching its own insurance solution and pricing based precisely on the data provided by the vehicles, which seems to be a competitive advantage for them. How do you see this topic of the connected car? Do you see it as an opportunity for telematics and connected insurance, or on the contrary, a challenge for insurers, especially as the European Data Act, for example, aims to regulate the sharing of this data?

• The example of Tesla

The example of Tesla seems interesting to me because it's causing a buzz. It has the merit of really popularizing connected insurance. All insurers are wondering if it's relevant, if Tesla is doing it, then maybe we should think about it.

For now, it seems to me that the insurance results are not very good. We'll see how it evolves. In my opinion, one bias with Tesla is that the pricing they use is based on the use of vehicle automation: you pay less if the vehicle drives autonomously.

It also highlights the vehicle itself, and so I think Tesla as an insurer is not completely neutral about it.

• The challenges of connected vehicles

As for accessing vehicle data, many players are thinking that all vehicles will be connected, so we can wait, and then when I can access the data easily, I'll launch a connected insurance offer. In my opinion, it will be a bit more complicated than that.

For data access, we come back to the point we mentioned earlier: to develop a program that is viable, relevant, data access must be affordable and with limited complexity.

The price today is rather set by the manufacturers. From the information I have, it is too high compared to what we can do even with smartphone technologies.

In terms of complexity, there will be a technical complexity linked to data standardization.

Not all manufacturers will provide the data in the same way, they will not provide the same data, and even within each manufacturer, there will be differences between models.

An insurer who wants to develop a connected insurance program will have to connect to a large number of suppliers. So there is a technical complexity that can be quite difficult to overcome. And then there will be complexities typically related to obtaining consent.

In terms of price and complexity today, these two elements are not yet aligned. I think it will take time.

In a conference quite recently, I heard Mobilisights, the data subsidiary of Stellantis, say that all new vehicles will be native connected by 2030. That's not right away!

By the time the fleet is massively connected, it will still take another decade.

So, in the meantime, I think we can do things!

Indeed, that leaves some time. But waiting is surely not the right strategy, I agree. Can you share with us what you have in mind when you say that it is already possible to do things in the field of connected insurance?

I think there will be examples of insurance offers pushed directly by manufacturers, who can use their data and then partner with an insurer and distribute these offers directly, typically in dealerships.

But there was nothing stopping them from doing this until now. There was no need to have a connected vehicle to launch insurance offers. So, I think there will remain a fairly substantial market that will need to be addressed differently with other technological solutions.

And in my opinion, the smartphone will remain a very relevant solution for a long time.

Especially since data sharing with the driver will continue to be done through a smartphone. I think that for a connected insurance project, there needs to be a prevention aspect, there needs to be an exchange with the insured. This is done through a smartphone.

And as for the quality of the data, data connected by a smartphone is of very good quality, especially since we can have information closer to the driver, to the user, typically related to distraction, that we won't have on connected vehicles or not at scale.

Conclusion

These are complementary technologies! And there's no need to wait for all vehicles to be connected to start moving forward. At least, that's what I hear. Thank you very much, Philippe, for all these insights, it's a fascinating subject. I invite you to subscribe to that newsletter because we'll be back next week, still talking about telematics and connected insurance. But most of all, it will be an opportunity to understand how DriveQuant, the company you created, operates this model and the added value it delivers to the insurers you work with on a daily basis. Thanks again, Philippe, and see you soon!

Thank you very much, Florian!

_

Learn more about DriveQuant