Pioneering UBI provider Progressive has changed up its messaging around the Snapshot usage-based insurance offering with a new ad campaign in the U.S. built upon the concept of Rate Suckers. The campaign shifts the UBI angle from being a simple means to achieving a discount, to an aspirational model capable of creating an elite group of drivers rewarded with lower insurance rates.

According to a recent Progressive blog, Rate Suckers are the poor drivers forcing up insurance rates for good drivers. And Progressive’s SnapShot is intended to free drivers from the burden of supporting Rate Suckers.

(Link to Rate Suckers ad: http://tinyurl.com/bocbmbk)

Progressive’s blog states: “Rate Suckers are real, and only Snapshot can stop them.

“You might not know it (63% of those we surveyed didn’t), but you’re paying more for car insurance because of others’ bad driving habits.

They’re called Rate Suckers, and they’re everywhere:
Behind the wheel for breakfast, lunch and dinner. 
Out to play at the strangest hours.
Slamming. On. Their. Brakes. Constantly.
Only Snapshot saves you! It sets you apart, so you can take back the savings you deserve.”

The message from Progressive could not be much clearer and clarity is useful in conveying the Snapshot UBI value proposition. But it is also possible that Progressive is over-simplifying.

The three driving behavior factors most frequently used as part of UBI programs generally are hard braking, harsh acceleration, the amount of driving and time of day. Progressive not only emphasizes hard braking in its blog but also in the functioning of the Snapshot module, which audibly and annoyingly beeps during hard braking.

Progressive’s model emphasizes the avoidance of hard braking and also focuses on taking a “snapshot” of a driver’s behavior – about a month’s worth of driving data – to establish A) whether the driver will benefit and, therefore, qualify for the program and B) the relevant discount.

Progressive is to be admired for its attempt at transparency and simplicity. The Rate Sucker advertising program is clearly intended to discourage drivers who drive a lot, drivers who drive between midnight and 4 a.m., and drivers that accelerate rapidly or brake hard.

Drivers may not agree with Progressive’s definition of the factors that determine safe driving or that lead to lower claims exposure, but at least the company is spelling out the objectives of the program. Drivers that fit the profile can self-select into the Snapshot program and those that do not ought not to even apply – unless they intend to change their driving behavior.

Interestingly, the Snapshot program’s safe driving criteria are antithetical to both the marketing and safety system strategies of car makers. Car makers routinely advertise the handling characteristics of their cars emphasizing both rapid acceleration and deceleration – both of which are shown in ads as the means to avoid hazardous circumstances rather than creating them.

Car makers also use advertising to demonstrate how safety systems can step in and assist drivers who may be distracted. Whether activating emergency braking in proximity to slowing or stopped vehicles or providing lane departure or blind spot warnings for inattentive drivers, the safety systems provide a more forgiving sensor cocoon in the car, with no penalty for the driver.

So all the things that car makers promote – acceleration, harsh braking or even frequent or late night driving - are likely to negatively impact a driver’s insurance rate, particularly if that driver uses Progressive’s Snapshot.  This raises the question as to whether Progressive’s criteria are too simplistic (ie. hard braking and harsh acceleration are not universally negative driving characteristics) or are OEMs promoting bad driving behavior either via their advertising or via the implementation of forgiving safety systems.

A driver who brakes harshly to avoid a collision with another driver that has made a driving error will want to be rewarded, not penalized. Similarly, a driver that accelerates to bypass a dangerous driving circumstance will also expect positive, not negative, feedback.

Progressive benefits from a simplistic message and a simplistic approach to UBI, but there is nothing simple about driving a car.  Progressive’s approach over-simplifies the proposition and ignores the fundamental nature of UBI in particular and telematics in general vis-à-vis auto insurance.

Progressive is adding thousands of Snapshot users every month, suggesting a respectable degree of success with the simplistic approach.  But the opportunity remains for competitors to deliver a more nuanced offering recognizing real-world driving behavior and leveraging, more broadly, the vehicle connection.

State Farm’s In-Drive offering, for example, delivers a broader functional portfolio including vehicle diagnostics, hazardous driving alerts, and a wider array of real-time vehicle and driving information. In fact, among the many UBI programs on the market Progressive stands out for the lack of added-value customer engagement.

Telematics has the ability to alter key aspects of the insured/insurer relationship around such issues as first notice of loss, timely claims processing and value-added services. If insurance telematics solely focuses on lower rates it is unlikely to have a lasting disruptive impact on the industry.

Usage-based insurance is a consumer deception. It is a shell game being foisted on consumers to lure them into allowing their car insurance company to glance over their shoulder as they drive and determine their insurance rate based on direct observation of their driving behavior.

UBI programs will no doubt be the focus of the upcoming Insurance Telematics Europe 2013 event in London May 7-8. The focus on UBI at this event is appropriate as the UK remains a source of critical leadership in bringing UBI to the mass market, something that has eluded all other geographies, including the U.S.

The failure of UBI programs to capture the imagination of the consumer lies in its deceptive quality.  The deception lies in the assumption that insurance companies know anything about what constitutes safe driving. But it is actually worse than that, because insurance companies are only allowed to use a limited set of data, depending on the regulatory jurisdiction, to draw their underwriting conclusions.

The attraction of usage-based insurance, or UBI, is that it is a potentially superior tool for determining rates than the existing models derived from driving history, credit scores, and demographic data.  UBI is also attractive to insurance companies trapped in a low growth increasingly low margin industry, because it allows them to draw away the lowest risk drivers from competitors while giving longer term customers a reason not to change.

Regulatory authorities and governments also like UBI programs because the participants tend to drive less, reducing congestion, carbon emissions and the potential for collisions and expensive claims. For young drivers or drivers with poor driving histories UBI programs, allowing remote tracking or monitoring, may be the only means of obtaining affordable insurance.

Strategy Analytics' own research has shown the highest level of interest in UBI programs among younger demographic segments in Europe and the U.S.  (Consumer Interest in Usage-based Insurance - http://tinyurl.com/blfq84q)

In Europe, where regulators have banned gender bias in car insurance underwriting, UBI may be an attractive work-around. And pay-as-you-drive programs based almost entirely on mileage, have also emerged for drivers who simply don’t drive much and, therefore, shouldn’t have to pay the same rates as those who drive more.

But the shortcomings of UBI programs are many and those shortcomings have limited the adoption of the technology to a few million users globally. At the core of consumer resistance is the surrender of privacy inherent in allowing the tracking of driving behavior. For the customer, UBI can be a crap-shoot – a 50-50 proposition that participation will actually produce a meaningful discount.

The offered discounts range from 5% just for the initial participation to as much as 40% based on the results of the tracking analysis. But some drivers will not qualify for any discount which can create a quandary in the event of a program using a tracking device that has been permanently installed (as opposed to an easily removed OBDII plug in), or in the case of a dealer or car OEM brokered offer that produces no discount. In the event of the former case the device may have to be uninstalled at a cost to the consumer, and in the latter case the customer may harbor bitterness toward the car maker or dealer.

But the basis for the discounting is specious. The most commonly cited factors are mileage, acceleration and hard braking. Some country and state regulators have banned the use of speed information for rating and we have already noted the restrictions on gender in Europe.

A recent conversation with a BMW executive had me questioning the entire UBI proposition. BMW will never participate in UBI offers, he said, because penalizing drivers for hard braking or acceleration is antithetical to BMW’s vaunted “ultimate driving” experience.  If BMW drivers participate in UBI programs and are, therefore, discouraged from hard braking or acceleration by their insurance companies, it undermines many of the pleasurable principals of driving a BMW in the first place.

But this is not just a BMW issue. An executive for a large multinational insurer recently questioned – in a personal conversation – the relevance of “hard braking” as an underwriting criterion.  Sometimes hard braking is a life-saving decision or an effective or appropriate reaction to an urgent or dangerous driving situation.

Many drivers have described to me the potentially harmful result of being forced to think twice or three times about accelerating or braking because of the presence of the tracking device on their car.  And I have yet to find a driver that is fond of the annoying beeping sound emitted by Progressive Insurance’s SnapShot device during what the device determines to be a hard-braking moment.

The Solution

My brother was visiting me recently and I told him about the tracking device I had installed in the OBDII port of my car for the purpose of qualifying for a lower insurance rate. His immediate response was: “Why don’t they just use your phone?” With those words my brother captured the very crux of the barrier between a potentially user friendly solution capable of empowering the customer and an annoying and invasive offering fraught with frustration and built to produce disappointment.

The most prevalent UBI offerings around the world require an OBDII plug in that attaches to the diagnostic port available on most, though not all, cars around the world. While the device and the port into which it is to be inserted are relatively simple to understand, the process is not user friendly.

Getting the device to the consumer generally requires the delivery of a product that has been programmed to work with the specific brand, model and year of vehicle to be insured. The hardware may be the same, but the software is not.

The process also assumes that the consumer will be able to locate the OBDII port, also a relatively simple exercise, but not very user friendly given the normal requirement of peering around under the driver’s side of the dashboard. OBDII ports were conceived to enable service technicians to attached diagnostic devices, not for insurance companies to track driving behavior and vehicle performance.

But that is just the hardware side of the proposition. Getting to the delivery and installation of the hardware device assumes that the consumer has accepted the proposition of sharing his or her data with the insurance company and, for that matter, any marketing partners with whom the insurance company may have hooked up.

Actual ownership of the data in most cases appears to lie with the insurance company. And the legal implications of that data ownership are less than clear in the event of an accident. As my disclosure statement states: “You release (the provider of the UBI device and service) and (the insurance company) from any liability associated with the disclosure of information gathered through (the UBI program).”

The problem at the core of the UBI value proposition is twofold: privacy and data portability and ownership. Many consumers have discovered that staying with a single insurer for too long – with a clean driving record and a related low rate – can make switching difficult. The new insurer won’t have access to the claims (or lack of claims) history that has produced such a low rate and will be, therefore, unlikely to match that rate.  This is different in the UK where claims history is centrally available. (Lesson #1 – you ought to switch your car insurance occasionally – or often? – to ensure you obtain the best rate.)

Carriers in the UK have been creating apps to enable consumers to get a preview of their potential UBI discount, but these apps do not solve the problem of complete consumer data ownership.  The very concept of consumer ownership of driving history data has yet to be seriously presented as a value proposition by either insurers or wireless carriers.  Perhaps with data ownership individual consumers could specify which driving attributes they care to share.

Data portability is the proposition that is actually being enabled by UBI programs but it is a concept that few insurers are embracing. In an ideal world, a customer that has gone to the trouble of installing a tracking device on his or her car ought to have ownership of the resulting data and the ability to take that data to another carrier for a competitive quote.

Here, the UK is taking the lead. Just as UK car insurers have led the way in UBI programs intended to defeat rampant fraud, and just as Norwich Union in the UK was one of the first insurance companies to use the Progressive approach to UBI insurance, an emerging insurance industry service provider in the UK, Ingenin, is poised to disrupt the entire insurance industry, not just car insurance.

Perhaps not surprisingly Ingenin’s plan revolves around leveraging the smartphone and all of its sensing capability for determining driving behavior along with a lot of other usage information that may be relevant for other forms of insurance as well. In fact, Ingenin’s proposition not only provides a platform for tracking driving behavior it enables the capture and delivery of information for roadside assistance or crash investigations.  And the Ingenin vision also calls for alerting drivers to known hazardous conditions or accident hotzones in real-time via the smartphone.

Even more significant, Ingenin is seeking to leverage voice and facial recognition to tie the insurance to a particular driver not just to the vehicle. Ingenin has yet to announce a major partner. In the meantime, the company is continuing work on bringing its vision to life.

In the end, it may take the use of the driver’s smartphone to deliver a personalized, empowering, and portable insurance proposition capable of transforming UBI insurance into a mass market phenomenon. Consumers are much more comfortable with and accepting of sharing their personal information via their phone – something they are consciously or unconsciously doing every day.

Nothing about current UBI programs is user friendly. In fact, everything from the hardware and software to the disclosure statements and privacy surrender are fairly hostile and opaque.  The use of smartphones as in the case of Ingenin can change all that.

Returning to Brazil for the first time in a few months I was struck at the paucity of technology in the taxi cabs. Having recently been at the Consumer Electronics Show in Las Vegas I was accustomed to everything from smartphones and GPS devices to cameras, sensors, backseat advertising displays, and payment terminals in cabs. Suddenly, in the land of the vehicle immobilization mandate (Contran 245) I was confronted cab after cab with nothing but a dispatcher and fare machine.

That is, until yesterday in my cab ride from Garulhos Airport in Sao Paulo.  According to the driver, the taxi that took me and my wife to our hotel was part of a 500-cab trial of a backseat tourist aid that was a real revelation and nothing I had seen anywhere before.

Put together by a local company, Comtecno, for the Brazilian Ministry of Tourism (and also available in Recife, where the World Cup with be contested), the device was a Samsung tablet computer equipped with cellular connectivity.  Comtecno calls the device the Multitoky Mobile and the company has as its goal deployment at 14 Brazilian airports for a total of 12,000 devices.

The tablet was unobtrusively strapped to the back of the cab driver’s seat, and I wouldn’t have noticed except for the fact that I am on the constant lookout for in-car tech.  The device charges while in the pouch and its use requires no assistance from the driver.

I immediately grabbed the device, figured how to open the browser and accessed a couple of email accounts.  Before long my wife and I were checking out local tourist attractions and restaurants and peppering the driver with questions.

“Do people like it?”

“Yes.”

“Do you ever use it yourself?”

“Yes.”

“How do passengers use it?”

“To help tell me their destination.”

“Do customers have any complaints?”

“The connection is slow.”

“Will it play video and audio?”

“Yes.”

With only 500 cabs as part of the test it was not surprising that the only overt advertising on the device appeared to be public service announcements warning tourists against sex tourism and people trafficking.  Coming in to Sao Paulo one could imagine a few more pointed warnings, but overall the device was a true joy to discover in the rear seat of our cab and a promise of future innovations to come.

Given the relatively high crime rate and the country’s position as have the third highest number of highway fatalities, one could argue for the implementation of cameras for anti-theft and fraud, along with sensors for maintaining vehicle distance in traffic.  But, generally speaking, the cab drivers are some of the best drivers in Brazil.  (A good contrast is China where there is little respect for lanes, let alone other vehicles.)

But if a Samsung tablet in the rear seat – tethered by a security link – is a first step on the path to vehicle connectivity in Brazilian taxi cabs, it is highly welcome.  It is far superior to the annoying embedded backseat advertising displays found in Las Vegas, New York City and Shanghai, among other cities. 

The rotating messages on these backseat screens are entirely without any merit as far as helping to educate either visitors or locals regarding popular local businesses or for providing informational traveler alerts.  Anyone who attended CES in Las Vegas is likely sick and tired of hearing Steve Wynn tout his gambling properties – a fact reflected in the reflexive tendency of most cab drivers to try to at least turn off the volume on the device even if they could not stop the video.

Kudos to Comtecno and the Brazilian Ministry of Tourism and the for conceiving a creative solution for connecting with tourists.  The next step will be to enable all types of transactions, including perhaps paying cab fares.  Of course, Brazilian cab drivers are still talking on their mobile phones too much and, occasionally, watching video both while parked and driving.  Oh, well, they can’t get everything right all at once.

When visiting Shanghai a couple months ago I was struck by the fact that multiple auto dealers visited during my stay did not have cars available with activated telematics systems.  This meant that the dealer was not able to demonstrate the technology to customers virtually guaranteeing consumer apathy.

This past week I was visiting car dealers in Italy and discovered a new barrier to consumer adoption, cars without power in the showroom.  Now I am the first person to acknowledge that consumers put a greater emphasis on style, drive and price than they do on infotainment and telematics (see attached slide), but cars without power in showrooms seems absurd in an age when the electronic and software content in cars is on a steep rise relative to the value of the vehicle.

These incidents were shocking to me because I experienced the telematics disconnect in multiple dealers in China (FAW Toyota, Nissan, BMW) and the power failure in multiple dealers in Italy (Fiat, Volkswagen, Hyundai).  The Chinese experience was exceptional because in the past I have had successful telematics demonstrations at Buick, Cadillac, Toyota, Lexus and Roewe dealers.

At the time of my visit to Shanghai, the dealer said that there was only one BMW in all of Shanghai that had telematics service provisioned for the purpose of providing a customer demonstration, but that vehicle was located on the opposite side of town.  The Nissan and FAW Toyota dealers simply had not activated any of their cars.  The only similar experience from my past was with Roewe’s Inkanet-equipped 350 which was most often lacking power on the dealer floor because the Android-based infotainment system had drained the battery.  (Roewe eventually installed Inkanet demonstration kiosks with their own power.)

The experience in Italy was surprising for the manner in which it was discovered.  The hatchbacks of many of the cars – which close electronically – were all ajar, not completely shut.  The natural instinct when one sees a door that is not fully closed is to give it an added shove or open and close it again.

Attempts to close these hatchbacks brought either a panicked or slightly amused response from the dealer sales person who had to explain that the hatch was powered and, when left on, tended to drain the battery in the showroom rendering the feature useless and the hatch not “closable.”  Usually the dealer had taken the added measure of wrapping paper or cardboard around the latch to prevent damage from customers trying to slam the hatches shut.

Is this problem emerging because cars are sitting too long in showrooms unsold?  Are dealers trying to avoid paying steep electric bills?  Not likely.

What is more likely is that dealers simply consider the electronics in the car to be a low priority, a fact that is borne out by Strategy Analytics research (http://bit.ly/XLOWpJ - Vehicle Purchase Behavior and Priorities of Chinese Consumers).  They have either reached this conclusion on their own in reaction to customer behavior or they are responding to a lack of auto supplier focus on selling sophisticated infotainment systems.  The danger, of course, is that dealers are following the lead of the factory.  If OEMs are not making a priority of infotainment systems then low attach rates and low customer satisfaction scores will result - ie. a self-fulfiling prophecy.

It may also be that dealers don’t want to engage in resolving consumer confusion regarding smartphone connections, voice recognition, navigation systems and apps.  Years ago Fiat was touting Blue&Me with point-of-purchase materials throughout much of Europe, but Blue&Me signs are no longer present in Fiat dealerships in Italy.

The picture is even more complex for Fiat, given the presence of Garmin, TomTom, and Magneti Marelli/Wind River navigation system options on its cars.  But Volkswagen has a growing range of infotainment options, as well, none of which could be demonstrated at the dealer visited in Italy.

The one exception encountered during this brief dealer tour was Hyundai.  Hyundai had a large sign touting the special edition of its i20 with a Pioneer infotainment system (the Aha Radio) enabling connection to a customer’s iPhone to access content and applications.  The dealer opened the hood to engage the battery to enable the demo, which amounted to a self-demo of the system which paired quickly and streamed audio via the supplied cable.

The sad reality is that solutions exist for both the telematics system provisioning problem in China and the power failure in Italy.  But the message is clear.  Selling infotainment and telematics systems introduces a new challenge to the process of selling cars – calling attention to power requirements, user interfaces, smartphone connections and apps.

Car makers from Ford and GM to BMW and Hyundai have introduce special dealer training programs and even Apple-like genius bars to bring customers – and dealers – along on the technological journey.  Clearly more guidance and support are needed if the industry is to achieve success with connected cars.  But making sure cars in showrooms are powered and that embedded telematics systems are provisioned seems like pretty basic stuff at this stage.

Tweddle set out more than five years ago to shift its printed manual business into the digital world.  That step has led the company to the development of vehicle relationship management solutions, a content and application delivery platform and, most recently, the ability to handle software over-the-air updates to cars.

Tweddle has learned quickly that vehicle connectivity is an all-in proposition.  Once connected to the car, either via an embedded modem or interfaced smartphone, the owner, dealer and car maker relationship to the vehicle is permanently altered.

Enabling a digital manual experience in the car – including static images and video of vehicle systems – not only needs to be VIN (vehicle identification number) specific, it also needs to be kept up to date.  It also means that the dealer and the OEM need access to that VIN-specific vehicle information.

This means that the VIN specific information must be accessible and updatable, which means it must be stored on an off-board server.  And it means that there must be a capacity for synchronizing on-board and off-board information.

But understanding these needs and realizing them in an implemented solution in a production vehicle are two very different things.  Achieving that objective has brought Tweddle into the fully connected vehicle world where the company is now processing streaming audio, delivering apps and software updates, and exchanging vehicle data.

Tweddle’s capabilities have somewhat outrun its client base as the company is prepared with solutions intended to stitch together the car, the customer, the dealer and the manufacturer, but the full circle experience has yet to be fully realized.  Closing the loop with drivers and dealers is essential for extracting the full value from vehicle connectivity which includes higher customer satisfaction scores, customer retention and additional vehicle sales.

The cornerstone of Tweddle’s value proposition – its intellectual property – is built around its foundational understanding of vehicle information enhanced with digital delivery and ubiquitous access.  Tweddle may have started years ago with manuals and dealer diagnostic systems, but the current solution has a wider scope.

Tweddle’s assets are currently embedded within many OEM engineering organizations in support of service and owner information development.  The company offers EDI integration with OEM manufacturing for access and analysis of vehicle build data and also enables management of OEM workflows in support of marketing, legal and engineering approval of content.

Nearly gone is the physical owner’s manual, to be replaced by on-board systems already in the market from Chrysler, GM, BMW, Tesla and others allowing consumers to access vehicle information directly on board or off-board from a call center.  Tweddle claims market leadership in developing, managing and delivering relevant information to owners via multiple media channels including print, Web, mobile and in the vehicle.

Much of Tweddle’s work is visible in Chrysler’s Uconnect and Toyota’s Entune connectivity systems.  But Tweddle is preparing for the next stage in its evolution by enhancing and deepening the connections between OEMs, dealers and customers.  By broadening access to vehicle information Tweddle is giving new life to owner's manuals even as it is rendering physical manuals unnecessary.

Car maker emphasis on mandated modernization, standardization or expansion across dealership bodies has almost no proven investment return justification, according to the National Automotive Dealer Association’s update of its Factory Image Programs report.  The lone exception to this ROI deficit is service expansion, where investment returns appear to be more predictable. 

The second phase of the NADA study also attempts to identify the nature of the future car buying experience and how dealers will or should adapt their facilities and sales and service strategies.  The study is available here: http://www.nadafrontpage.com/facilitystudy.xml. 

Consultant and ex-McKinsey analyst Glenn Mercer conducted the study and captured the essence of its findings thus: “Renovating a dilapidated store pays off, and while one should not expect much of a return from maintenance spending, service expansion can pay off well, whereas modernization investments tend to depend on how much assistance the OEM offers, and standardization spending is almost always a pure deadweight loss.”

The first phase of the study, released at last year’s NADA gathering, drew a standing-room-only crowd to hear the results.  With a more forgiving economy easing the pressure on dealers, this year’s release captured wide attention, but not the same level of intensity.  But the message was no less important.

Car makers have not given up on their image campaigns, and NADA has not given up its campaign to reverse or redirect these efforts.  “We’re requesting that auto manufacturers redouble their efforts to provide dealers with better business cases before investing in facility upgrades, and especially, to ease off on standardization demands that seem very hard to justify,” Mercer said.

Mercer’s report, which encompassed inputs from car makers and dealers along with retailers from other industries and architects, among others, attempts to paint a picture of the car dealer of the future.  In this context, he was able to identify the widespread interest in and adoption of Apple retail tactics, though he was also quick to note the customized external look and feel of most Apple stores and the crowded interiors – unlike the typical “garage Mahals” characteristic of many car dealers.

At the same time, selling and servicing a car is a different experience from selling a mobile device.  Study respondents identified the streamlining of paperwork and more efficient customer throughput at the dealership further complemented with concierge-like off-site service or vehicle pickup and dropoff as strategic directions in the market, few of which have been targeted by OEMs.

“Our conclusion is that the dealership system will fundamentally remain intact in 2025, but there is the possibility for much more efficient design of facilities, for example by moving support functions offsite, and by using new format approaches to grow service volumes,” Mercer added.
Mercer expressed great concern that the current trend to build more expensive and more brand-customized stores will lead to excessive and wasteful spending, as dealers repeatedly raze and rebuild their facilities, and as automakers constantly update their brand image campaigns.
“Meanwhile, as customer needs and behaviors continue to shift, we urge automakers and dealers to get more creative in addressing those changes, especially in service work, and that automakers become more flexible in approving low-cost ways to implement these ideas,” he said.

The disconnect between OEM and dealer priorities was manifest on the NADA show floor where dozens of companies offered customer relationship management (CRM) solutions, but few were offering the means to connect with consumers directly in their cars.  More service related apps were offered by companies such as Kaarma and DME Automotive, but the pieces of car connectivity tied directly to dealers were missing in most booths with the exception of Xtime, which was announcing additional dealer management system (DMS) integration and compatibility along with enhancements to the company’s service scheduling application.  But to achieve those returns, dealers need the tools to reliably and predictably capture more service revenue from new and existing customers. 

Competing solutions from AutoLoop, TimeHighway or DealerSocket.com focused on service scheduling via mobile apps or online, but were not showing the kind of deep integration offered by Xtime and reflected in the service scheduling function built into Hyundai’s Bluelink.  BMW, GM, Ford and Mercedes-Benz have all made some efforts to integrate in-vehicle connectivity platforms to dealers, but more work needs to be done and better integration with dealers needs to be achieved.

The need for enhanced customer connectivity strategies is made clear from the statement in the attached exhibit: “assuming you can fill the bays quickly.”  The best opportunity for most dealers to grow and capture a return on their investment is from an expansion of the service department.

The systems that are emerging to enable a stronger customer connection include on-board digital service manuals from companies such as Tweddle linked to telematics systems capable of integrating with dealers.  According to data released by Experian at the NADA event last week, cars are lasting longer.  And the longer cars last the greater the challenge facing dealers in holding onto that business.

Dealers need help with online resources and apps as well as access to vehicle data.  Car makers should be doing more to help dealers build the systems, solutions and programs to keep customers returning to the dealership and filling those service bays.  In the end, what good is an OEM image campaign focused on dealers if the customers are not bringing their vehicles back for service.

Ramping up service volume is important for a variety of reasons not touched on in the NADA report.  Enhanced and expanded service feeds on itself as added volume contributes to improved efficiency.  It also contributes to higher customer satisfaction and repeat vehicle sales.

One ominous note from Mercer’s findings is that only about 20% of dealers perform body work.  For most dealers, the volume of body work is insufficient to justify the investment.  What dealers may not realize is that a car that has experienced a collision reflects a customer at the lowest point of their ownership experience.  Body work is a strategic service offering for any dealer, one that is capable of contributing directly to higher customer satisfaction and repeat sales.

What’s good for the dealer is good for the car maker.  Car makers and dealers have a common interest in vehicle service and repairs being handled with authorized parts by a certified technician.  Proper service delivered in an appropriate manner contributes to positive CSI and repeat business.  Facilities programs contribute little or nothing to this process and poison dealer-OEM relations.  The sooner OEMs can shift their focus to helping dealers expand and improve their service offerings, the healthier the dealer-OEM relationship and resulting profits will be for both. 

“Most maps, including Google Maps, have not yet mapped the area.” – The Huffingtonpost (Sept. 2012) describing the Angelika Film Center in the Mosaic District of Merrifield, Va.

Can automakers, dealers, Tier One suppliers, and automotive app developers afford to continue requiring customers to pay ($199!) for annual map updates? My latest navigation adventure highlights the fact that the time has arrived both for “free” lifetime map updates in the car and more creative means for delivering monthly, weekly, DAILY! map updates for on-board navigation systems.

The map in the car has become the spinal cord for safety, powertrain, security, infotainment, and navigation systems.  Nearly every advanced system in the car requires access to location information – preferably on-board.

Increasingly, the on-board map is becoming a shared resource both for advanced driver assist systems and contextually aware infotainment systems.  For both of these cases context is determined, in part, by location along with weather, traffic and driver status among other things.

But there is an even more urgent issue, that I will return to, and that is the danger inherent in a driver following navigation instructions with an out of date map.  Few things are more distracting or disturbing than being told to make turns onto roads that don’t exist to enter freeways that have been bypassed.

All of these elements were brought home to me this past weekend.

My wife and I were trying to get to the relatively new Angelika Film Center in the Mosaic District of Merrifield, Va. last Sunday.  It was our first trip to this theater, so I was confident that neither the address nor the name of the Theater would be available in the on-board navigation system in my 2013 BMW 3 Series.  (This assumption would later prove to be accurate.)

To get to the theater I used Fullpower’s MotionX GPS navigation app on my iPhone 4.  MotionX is one of the most popular navigation apps on the iPhone.  Unfortunately, on this occasion, it insisted on directing my wife and I to a destination five miles away from the theater’s actual location.  (UPDATE: This was due to the fact that the Nokia map data was missing the information for my destination, according to Philippe Kahn, CEO of Fullpower.)

My wife then proceeded to look up the theater in the on-board POIs, with no success.  We then obtained the address online and attempted to enter it directly into the navigation system – ignoring the fact that the system in the car will not accept addresses that are not yet in the system.  So, in this case, we entered the street number closest to the actual address of the film center.

Half an hour after the movie’s start time we arrived at the cinema.  We accepted our fate and settled into a round of shopping and dinner and went to the next show – making for a later evening than originally planned.  (At least the toney establishment had toasted caramel popcorn!)

It was a minor event at the close of an otherwise uneventful weekend, but it highlights a huge problem that remains unsolved – on-board map updates.  (Yes, there are a few ways this unfortunate incident might have been avoided such as: a) using the Sendtocar function, which for some reason has not been working for my car; b) use the on-board Google Local Search to obtain the address – just checked and this would have indeed worked; c) ring up the BMW Assist Concierge service and have them download the address; or d) try a different mobile navigation app.)

Anyone who has been through a similar experience will appreciate the minor nightmare of not being able to find a simple destination.  You can imagine my wife and I pulling over into parking lots and side streets to double-check the entry and the results and to try a different approach.  I shudder to think about the amount of eyes-off-road time that was required before we found a solution and reached our destination.

But my minor nightmare is a terrifying reality.  Not only is the out-of-date map situation a nuisance, it is a driving hazard and a customer satisfaction failure.  It is no surprise, then, that JD Power identifies navigation systems as a source of ongoing and mounting complaints for car owners.

While JD Power is focused primarily on the user interface, it is time for the industry to confront the fact that every car being sold is going out the door with an obsolete map.  An obsolete map on board is an invitation to catastrophe for the car dealer, the manufacturer and the customer.  Yet no one seems especially worried or concerned.

The problem is most obvious in emerging markets where new cities and roads are proliferating on an almost-daily basis highlighting the limitations of digitized map in the car.  It is no wonder that Strategy Analytics’ research with navigation users in China has found the typical driver using multiple navigation systems - phone, on-board and portable navigation device – to get from point A to point B.

The good news is that the leading map makers – TomTom and Nokia – have progressed their map-building processes to enable daily if not real-time map updates on a global scale.  Nokia has even taken steps to put more of its surveying vehicles on the road while also providing for crowdsourcing of map data, something TomTom initiated many years earlier.  The problem lies in delivering those updates to the on-board system.

Most consumers these days will use their mobile phones to navigate if a destination is in a new or unusual location.  I will not delve into the shortcomings of mobile phone navigation in a car, but suffice it to say it is popular based on the findings of multiple Strategy Analytics surveys.

Car makers Ford, GM and Toyota Motor Europe have tried with varying success to enable display in the car of smartphone-based navigation instructions.  Ford was first with this approach and has had the most success.

But smartphone-based navigation defeats the integration of the map – the application spinal cord of the car – into advanced safety, powertrain and infotainment systems.  While smartphones can, indeed, deliver a contextual experience to the driver, the on-board map is necessary to properly anticipate workload demands on the driver based on the integration of on-board sensors with map-based and other inputs.

So, smartphone integration, while attractive and a useful car-selling proposition falls short of a fully integrated experience.  But that doesn’t mean the smartphone can’t provide another means to solving this dilemma.

At the recent North American International Auto Show in Detroit, Johnson Controls showed a solution from NNG using the smartphone as a map updating tool.  While the details were not clear – including whether the entire map or just portions of the map will be updated or, indeed, what the cost will be – the concept is spectacular.

Any driver getting into a car ought to be able to update the on-board maps on demand as needed.  Given current connectivity options, the smartphone is the smartest and best solution to this problem.

The fact that Johnson Controls is the first to show this approach publicly reflects the power of a newcomer entering the market.  While NNG works closely with other Tier Ones, such as Harman, it is Johnson Controls that put the concept front and center in its booth in Detroit, although no press release was published.

Based on conversations with competing navigation software providers, the likelihood is that competing systems and solutions will soon be on display.  The bottom line is that, once again, the smartphone represents the solution to a hazardous driving condition, not the source.  At stake is the mitigation of driver distraction, enhancing the driving experience and assuring the highest level of customer satisfaction.

2012 will be remembered as the year of usage-based insurance. But in retrospect it is a lot of sound and fury signifying nothing. Is usage-based insurance the silver bullet to simultaneously reduce traffic congestion, carbon emissions and highway fatalities?

The ultimate objective of UBI programs is to modify driving behavior or reward existing good driving behavior. (Yes, I know, insurance companies are looking to reduce churn by rewarding their best customers and stealing their competitors' best customers, but let's look at it from the consumer's perspective.) Some progress was made in 2012, but there is ample room for improvement in the area of on-board/embedded systems, OBDII plug-ins, aftermarket systems and smartphone apps.

So where do we stand at the outset of 2013? 

First, it is important to understand the key objectives of driver behavior modification: 

1.  Increased safety
2. Reduced emissions
3. Increased fuel efficiency
4. Lower insurance premiums

I start the year off in a new 2013 BMW 3 Series with a remarkably distracting BMW Apps iPhone integration (not reviewed here).  In trading up from my 2011 BMW 3 Series I have pleased my wife by moving to remote keyless entry, but disappointed her with a car that has no seat warmers – unlike its predecessor.  Like its predecessor, it also lacks a backup camera or sensors.  (Clearly out of step with the impending U.S. mandate.)

Still, the new car does come with a turbo-charged four cylinder engine and start-stop technology significantly reducing fuel consumption while increasing horse power.  There are multiple sources of feedback around green driving in the car and there is a toggle near the shifter to select driving style – Sport or ECO PRO.

With ECO PRO, the driver can extend the range of the vehicle by adjusting driving style according to cues in the instrument cluster.  It is no surprise that a German car company offers such a function since an hour-long drive on the Autobahn can produce dramatically different fuel consumption – and, hence, range – results based on speed.

A system for discouraging speeding in a BMW is a stroke of genius, particularly for me, given the fact that my record of violations spiked following the acquisition of my first BMW.  (There is no app – not even Coyote or Trapster – that would have saved me.)

The ECO PRO driving mode introduces a series of instrument cluster symbols and signals making very subtle (it IS a BMW after all) suggestions primarily based on reducing acceleration.  ECO PRO also ties into the operation of climate control systems for maximum fuel savings.  The system is even able to calculate and display for the driver the estimated percentage of fuel savings based on the settings selected.  The driver can also control the timing and nature of the driving tips offered by the car.

This system can provide a history of fuel consumption including energy recovery.  And, yes, it can also control the rate of cabin heating or cooling and the output of the seat heater – if there were one.  Similar systems are available from other car makers, but I am most familiar with the BMW offering and it is emblematic of an industry trend.

In contrast to this system of buttons, settings, alerts, icons and statistical analysis, my wife’s Toyota Sienna is equipped with an aftermarket Pioneer Aha Radio which periodically provides an “ECO Graph” of her driving performance.  I personally think my wife is something of a lead foot, but she thinks she is performing pretty well in this report.

Unfortunately, the report appears at random intervals and fails to explain what, if anything, my wife is doing well or how she can improve.  For her, the driving feedback is simultaneously interesting, intriguing and frustrating.  She thinks there should be rewards – anything from gold stars to insurance discounts – associated with her good driving.

There is no doubt that she is correct.  Her driving experiences in 2012 included a brief stint testing Progressive Insurance’s SnapShot usage-based insurance OBDII plug in.  The device annoyed her with loud beeping during hard braking, but wirelessly delivered a graphical presentation of her driving behavior to a Website. (There are a wide range of third-party offerings with Website dashboards charting driving behavior and providing driving tips.)

Progressive offers SnapShot in Virginia, where my wife and I live, but after mailing the device back to the company, the insurer never responded with an evaluation or offer of coverage.  SnapShot claims customers can save up to 30% in the program. 

Whether that is actually true or not depends on how much you trust an insurance company.  Progressive more or less discourages drivers the company determines will not benefit from the program.

My wife briefly tested another OBDII plug-in from a company called GridLoyalty.  Founded by a former Intelligent Mechatronics executive, GridLoyalty promised a range of affinity offers based on driving behavior.  Unfortunately, most of the affinity offers were associated with organizations – such as convenience stores – in the Las Vegas area.  While the device provided wireless feedback to a Website – a la Progressive – there were no offers in Virginia.

In the year past, insurance companies and their third-party partners, crowed about the wonders of usage-based insurance.  Even government regulators embraced usage-based insurance as a tool for reducing driving and, therefore, congestion and emissions.  Studies show that drivers in UBI programs tend to drive less in general and after joining the programs.

In spite of the enthusiasm and publicity surrounding UBI programs and more than five years of market availability there are still fewer than 2.5M users of these systems around the world.  There is good reason for this lackluster consumer response.  The programs offer minimal savings and require a significant surrender of privacy.

The daily relevance of an insurance discount is less a benefit than a sword of Damocles swinging over the head of the driver in case that driver deviates from his or her previously safe pattern of driving.  What is missing are daily rewards and/or penalties.

MetroMile, an insurance startup, is introducing a pay-per-mile based offering that the company hopes to expand to other value propositions such as vehicle service and warranty offers.  The MetroMile offer is a step in the right direction, but falls short.  What is really missing is a more comprehensive affinity program tying vehicle use to offers and discounts for driving-relevant products and services such as fuel, parking, restaurants and tolls.

The MetroMile offer (Company Website: http://bit.ly/ZRHooE) is attractive for its simplicity relative to offerings from insurance companies.  But what is necessary is for local governments, tolling authorities, roadside franchise operators and such to coalesce around wireless payment systems to enable a more broad-based program of driver rewards and, yes, penalties – ie. drive less, save more.

Implications:

Car makers, such as BMW, are already delivering on in-vehicle systems designed to modify driving behavior.  The next step is actually rewarding that good behavior with more than just insurance discounts based on intrusive tracking systems. 

A free cup of coffee, tank of gas, parking space, hamburger or oil change ought to be enough to convince nearly any driver to be willing to share their location information and vehicle data.  Though distracting, BMW Apps does provide smartphone-based vehicle information feedback while also enabling some limited remote operation of the vehicle - illustrating the fact that there is a role for the smartphone in this new value proposition.

And what about traffic management authorities able to reward drivers - from specific neighborhoods and/or on short notice via smartphone apps or other alerts! - for NOT driving on days when high levels of congestion or pollution are anticipated?  Or maybe specific drivers are granted HOV lane access or other driving privileges on demand or for a particular time of day - or for a premium as in the Washington, DC area.  There are clear opportunities for public-private collaboration and/or direct consumer engagement.

Is there a future for usage-based insurance?  Yes, there will always be consumers who will do anything for a discount of any kind.  But usage-based insurance is likely to remain a niche application for the foreseeable future.  That niche role will be a disappointment to governments hoping for UBI programs to provide a market-based means for reducing emissions and traffic.

But if car makers are able to build more effective affinity programs, then UBI programs will benefit from the expansion of vehicle data sharing.  The question is which marketing partners and OEMs will lead the way in 2013 and what will these programs look like.  And, finally, is it possible to retrofit a 2013 3 Series with seat warmers?

Just picked up my wife's Toyota Sienna from the local Toyota dealer where I bought the car and heard a familiar tale of woe.  Seems a customer had a bad accident and took his vehicle to an independent repair shop as per direction from his insurance company.  The independent shop patched the car back together except that the car was no longer functioning properly.  As a result, after spending $10,000+ with an independent, the customer had to bring his car back to the Toyota dealer to try to figure out what was wrong.

The scenario is more familiar than you may think and it highlights a multi-billion dollar opportunity currently overlooked by the automotive industry.  Drivers who get into accidents - big ones or fender benders - nearly always call the insurance company first to file a claim or to get assistance and advice.  The insurance company almost always directs the customer to its network of preferred independent shops to repair the car.  There are a lot of things the insurance company is NOT telling its customer and using genuine OEM parts is just the beginning.

By going to an independent shop the customer risks his car:

-> Being rapaired with unauthorized, third-party parts which will void the warranty.  This includes everything from sensors to windshields.

-> Being repaired by a company that may not even have access to specific parts - either from the OEM or third parties - in the event the car is a new model.

-> Being repaired poorly and incorrectly - particularly with regard to electronic systems.  While independents have some protection to access repair information from OEMs, the information is expensive and independents usually can't afford to repair all makes and models.

-> Being repaired unsafely.

In the worst case, if the customer is leasing the vehicle he or she may be liable for any or all third-party replacement parts being removed and replaced by genuine OEM parts at the customer's expense.

It is for this reason that dealers in the United Kingdom have mounted a now two-year-old campaign to convince customers to call their dealers first, not the insurance company.  Using this approach, the dealer becomes an advocate for the customer to ensure a proper repair occurs, regardless of whether the repair is performed by the dealer or an independent.

As for Customer X at my local Toyota dealer, hours of labor will now go into a forensic exercise to diagnose the problem before the repair of the repair can begin.  It won't be long before dealers in the U.S. are spreading the same message.  Customers should call the dealer first before the insurance company - or at least make sure the dealer has a chance to bid on the repair.

The dealer has a much bigger stake in ensuring the proper repair is made and the customer made happy.  The insurance company is solely interested in mitigating its expense.  The well-being of the customer or the car is a lower priority.

What's at stake for dealers and OEMs?  According to the Automotive Aftermarket Industry Association, the collison repair business in the U.S. is worth $40B - and new car dealers have about a 15% market share.  That's what is at stake.  To say nothing of the opportunity to sell the customer a new car and, generally, to provide an enhanced customer care experience which is likely to produce higher customer satisfaction scores.

For additional insight:  Insurance Telematics: Path to Profit through Accident Aftercare - bit.ly/XVVYua