Detailed system and semiconductor demand analysis for in-vehicle infotainment, telematics and vehicle-device connectivity features.

February 4, 2014 07:11 rlanctot

The National Highway Traffic Safety Administration in the United States has announced its plans to continue studying and investigating the use of dedicated short-range communication (DSRC) technology for vehicle-to-vehicle and vehicle-to-infrastructure communication for the purpose of preventing light vehicle crashes:

“NHTSA is currently finalizing its analysis of the data gathered as part of its year-long pilot program (managed by the University of Michigan Transportation Research Institute) and will publish a research report on V2V communication technology for public comment in the coming weeks. The report will include analysis of the Department's research findings in several key areas including technical feasibility, privacy and security, and preliminary estimates on costs and safety benefits. NHTSA will then begin working on a regulatory proposal that would require V2V devices in new vehicles in a future year, consistent with applicable legal requirements, Executive Orders, and guidance. DOT believes that the signal this announcement sends to the market will significantly enhance development of this technology and pave the way for market penetration of V2V safety applications.”

The significance of the announcement is that it applies only to light vehicles, not trucks; it requires no significant steps by any of the interested parties and it provides no time frame for those next steps although some journalists reported that the first steps toward rule making are expected to occur before the end of the Obama administration. What specifically did not happen was a mandate for DSRC technology to be required for FMCSA class 6,7 and 8 commercial vehicles as well as for emergency vehicles.

The announcement also did not make the Michigan test bed data available to the industry or other independent analysis. This means all interested parties will have to wait for NHTSA’s report.

The announcement did mark the movement toward better explaining to the general public what V2X is all about. The focus on collision avoidance was important, but it is not clear whether this selling message will overcome consumer concerns regarding security, privacy and surrendering control of the car – even for the purposes of avoiding a crash.

By the time DSRC makes it to market it is highly likely that competing technologies will already have been adopted via market mechanisms rendering DSRC irrelevant. The one thing NHTSA could do to change this depressing prospect is to require the implementation of the technology in those vehicle segments (commercial) where it has the relevant authority. An announcement of its plan to do so would have been a very big deal. Yesterday’s announcement fell far short of this.

January 31, 2014 14:37 rlanctot

Two senior GM executives appear to be working and speaking at crosspurposes.  This isn’t necessarily unusual, but given the fact that the focus of their disagreement is the importance of infotainment systems, it is worthy of note.

Speaking at the J.D. Power & Associates Roundtable at the National Automobile Dealers Association gathering in New Orleans last week, Senior Vice President of General Motors Global Quality and Customer Experience Alicia Boler-Davis highlighted the work of multiple design teams and engineers to understand and define the next generation of infotainment systems.

In her words:

“One area where we’re intently focused right now is in-vehicle technology or infotainment. This area of Product Excellence continues to rank very high with customers when it comes to the overall performance of their vehicles. In fact, according to J.D. Power, customers across the industry report more audio, entertainment, and navigation problems than any other category.

“Infotainment research at GM actually started many years ago. Back in 2007 – the same year Apple introduced the iPhone – we embarked on a five -year study to understand how people use their car radios and navigation systems, as well as their phones, iPods, and other portable devices in their cars.

“We watched others venture into this area early on, so we wanted to make every effort to do the best we could with our new systems.

“In fact, we went so far as to send our infotainment system designers into the field to ride with customers to work, on errands… even on vacations!

“We learned a lot. Then we applied what we learned to new designs and interfaces. We tested our designs at customer clinics, then redesigned them and tested again.

“Of course, I’m simplifying the process here. The point is that we used exhaustive methods to incorporate the voice of the customer into our new infotainment systems from the start. We streamlined the hardware and software, we made the technology more intuitive and easier to use, and we built in brand differentiation along the way.”

(Credit the GM Authority newsletter for publishing the full transcript of her remarks:


Meanwhile, in a recent interview in CarAdvice, GM incumbent executive vice president of product development Mark Reuss complained about the priority the company had placed on infotainment systems in the past 4-5 years, and the harm that focus had done and was doing to the brand and to vehicle performance.  Reuss asserted in the interview that issues such as ride quality, safety and other priorities had been de-emphasized.  In his words:

“We went through an era here where there were certain people who thought that if we just did the coolest telematics and driver infotainment thing that we would win [in the market].

“Obviously nobody is going to care about how a car drives, how the car sounds, how the car crashes … it’s all going to be about infotainment.

“All those things are important, but are they the defining things on how good a car is? Not always. That won’t always separate you, but the core fundamentals of the car will.”

Boler-Davis’ remarks highlight the fact that GM, among many OEMs, is turning to consumer-oriented vehicle design.  This kind of approach represents precisely the kind of work GM or any car maker should be conducting.

No doubt this work must be conducted in the context of other vehicle design criteria.  But there may be an internal perception that infotainment is suddenly the sexy new area of focus to the detriment of other mission critical systems.

It is easy for other departments to feel de-emphasized or excluded when senior management is talking about Google, Android and LTE.  In fact, GM’s decision to join the Open Automotive Alliance has no doubt set off alarm bells throughout the organization – especially since Google has no comprehension whatsoever of automotive design criteria beyond capturing driver search results, serving up advertising and restricting Android modifications.

One cannot help but be sympathetic to Mark Reuss’ point of view.  But I cast my ballot in support of ongoing customer-focused research.  GM needs to solve the UI challenge of connected cars.  The sooner that problem is tackled, the sooner the “genius bars” in dealerships can be taken down and the Connected Customer Specialists can be recalled.

Reuss, like every other senior GM executive across every functional area in the organization, needs to recognize the importance of getting connectivity right and how it is already impacting the bottom line.  Being connected means enhanced safety – and Reuss’ task will be to ensure that connections are safely executed and ultimately deliver a safer and more delightful driving experience. 

Connectivity will mean higher customer satisfaction, higher customer retention, higher market share, and higher aftersales revenue.  What more does anyone need to know?

January 24, 2014 10:43 rlanctot

The CEOutlook newsletter recently reported on a promotional campaign via which Best Buy is offering customers coupons for free pairing of their smartphone with the car audio system through Geek Squad Auto Techs.  “If the customer doesn’t have a Bluetooth radio he’s given a 25% off coupon on select Bluetooth car audio products including radio or interface kits,” according to the report (

The offer is a significant step – if true – and reflects the kind of alignment of the mobile phone and car stereo departments I proposed in a blog nearly three years ago ( But it does not go far enough.

As a destination retailer, Best Buy is uniquely positioned to tackle automotive aftermarket opportunities. Anyone who has visited a Best Buy recently knows that the car stereo department is isolated in the rear of the store as if it were a high demand category that customers were willing to seek out.

The reality is that car stereos need to be somewhere closer to the front of the store – or the category should be completely removed. It is hopelessly lost in the back of the store.

I argue that the category belongs closer to the front and in proximity to the mobile phones because today mobile phones and car stereos work together.

Even more important and appropriate is the fact that mobile phone and car stereo connectivity needs to be explained and assistance with pairing is a valuable service to offer consumers. Anti-texting and driving laws are rapidly spreading across the U.S. along with laws requiring hands-free technologies for making mobile phone calls while driving.

There seems to be an assumption that consumers universally understand how connecting phones with Bluetooth works and are all complying – but the reality is that this is not happening.

At the same time, both insurance companies and wireless carriers have powerful vested interests in convincing consumers to connect their mobile devices in their cars to ensure that they are used safely. Texting and driving, in particular, is a scourge the carriers would prefer to see terminated before regulators force the implementation of texting and driving blockers.

I propose that Best Buy bring together the wireless carriers, the insurance industry and the aftermarket car stereo companies with the following proposition:

Consumers who participate in usage-based insurance programs with selected insurance companies (using OBDII devices installed by Best Buy) will qualify for insurance discounts (provided the usage-based insurance product detects texting-free driving) that can be monetized via discount coupons for Best Buy purchases or for commercial-free listening on Pandora.

With one campaign Best Buy:

Stimulates interest in the mobile electronics department

Solves the problem of customer Bluetooth pairing

Creates an opportunity for a customer return visit and future purchase at Best Buy

Provides and incentive for and thereby mitigates or ends texting and driving

Simultaneously makes new friends in the US Department of Transportation, the insurance industry, and the wireless industry

And introduces Pandora to even MORE consumers.

How about it Best Buy?

January 8, 2014 15:18 rlanctot

Car makers are diving head first into the app development arms race. This is leading to expensive decisions and decisions intended to avoid expensive outcomes. The most visible of these efforts is the Open Android Alliance or what I would call the “open” Android “alliance”.

The stated goal of the effort from Google in “cooperation” with Audi, GM, Honda, Hyundai and NVIDIA is to facilitate the propagation of Android apps in cars either via embedded systems or connected phones.  Less obvious are the requirements that Android not be modified and that any resulting intellectual property becomes the property of Google.

It is important for all involved – and there are likely to be many more soon as Tier 1 suppliers are gazing longingly over the fence yearning to participate – to understand that Google does not come bearing gifts.  Google comes bearing shackles in the guise of gifts. 

The only thing that might redeem this program is if Google can find a way to accommodate those car makers that choose to use Android for their own purposes – among them Renault, Volvo, Mercedes, Nissan and a growing roster of Android “forkers.”  Another mark of genuine interest in furthering the industry’s car connectivity aims would be a reticence on the part of Google to penalize those organizations that refuse to get on the bus.  (And, no, that is not a reference to Android’s inability to read automotive bus communications.)

Skepticism regarding Google’s motivations is an appropriate reaction.  The company has yet to prove its commitment to helping solve the unique safety and mission-critical performance and cost requirements associated with automotive solutions – with the possible exception of Google’s semi-autonomous car.

In fact, if Google were sharing technology from its SDC efforts its sincerity would be less suspect.  One can only hope OAA is not the latest Trojan horse from Silicon Valley.

January 6, 2014 14:36 rlanctot

NisAfAfter demonstrating phenomenal lag-free video/computer game performance across intercontinental connections at its pre-CES press conference, NVIDIA announced plans to bring its Tegra K1 to the automotive market with a focus on advanced driver assist systems and semi-autonomous driving applications.  NVIDIA also showed how the graphics processor can be handy for industrial designers rendering images of vehicles early on in design and also showed customizale ICs with the focus on making it easy for designers to tinker with materials rendering.

NVIDIA touted its existing relationships with Audi, BMW, Tesla and Volkswagen and described the Tegra K1 as "the first mobile processor to bring advanced computational capabilities to the car."  The Tegra K1 features a quad-core CPU and a 192-core GPU using the NVIDIA Kepler architecture.

NVIDIA expects the Tegra K1 to ddrive camera-based ADAS systems - such as pedestrian detection, blind-spot monitoring, lane-departure warning and street sign recognition - and can also monitor driver alertness via a dashboard-mounted camear - an application which will be critical to SDC applications.

NVIDIA is engaged in a competitive struggle with Renesas and Intel to bring higher processing power into cars.  NVIDIA has been a leader in seeking to aggregate in-vehicle functionality encompassing safety, infotainment, HMI and digital ashboards onto a single processor.

NVIDIA has furthered these efforts by participating in Google's announced plans for a so-called OPen Automotive Alliance to define the protocols for the implementation of Andoroid in automobiles.  The OAA currently includes Hyundai, Audi, GM and Honda, according to industry reports.  Other car makers implementing Android, most notably Nissan, Renault, Daimler and Volvo, have so-far resisted Google's OAA power play.

NVIDIA is uniquely positioned to help mitigate car makers' concerns regarding Android's processing, memory and power consumption challenges in cars.  Targeting safety applications for Tegra, in particular, puts NVIDIA more directly into the mainstream of mission critical on-board systems in cars.

As a further note, NVIDIA says Tegra K1 provides an open, scalable platform that is fully programmable, so it can be enhanced via over-the-air software updates that support new functionalities as they become available from automakers.  The Tegra K1 is part of the VCM module program which includes OS support for QNX, Android, Linux or Widnows, the company said.  NVIDIA claims 4.5M cars on the road currently using NVIDIA technology.

January 6, 2014 00:35 rlanctot

NHTSA Administrator David Strickland may have the last word on investigations of Tesla, but it has nothing to do with cars catching fire. The word on the street is that prior to his formal resignation and departure from the National Highway Traffic Safety Administration (NHTSA) three weeks ago, Strickland initiated a preliminary investigation regarding Tesla’s lack of cooperation regarding NHTSA’s revised driver distraction guidelines.

(Neither Strickland nor NHTSA representatives were available for comment.)

The revised NHTSA guidelines govern everything from the display of images and text, to moving map images, scrolling lists and manual text entry. The Tesla Model S allows drivers to freely browse the Internet, scroll lists, manually enter information and view Web pages while driving – all on the vehicle’s 17” touch display.

Tesla’s Model S not only aced an evaluation by Consumer Reports and a safety assessment by NHTSA, it was found to be the most usable system yet tested by Strategy Analytics. Nevertheless, the infotainment system in the car fails to adhere to most of NHTSA’s recommended guidelines.

NHTSA has taken a voluntary approach to its driver distraction guidelines in the hopes of having a more immediate impact on the automotive industry. The objective is to provide immediately useful guidance without proceeding to lengthy, expensive and usually contentious rule-making – which normally leads to mandated limitations or requirements.

Tesla may get a pass for its recent car fires, especially after having taken measures to mitigate what might have contributed to those incidents, but Tesla is not likely to get away with whistling past the driver distraction nannies at NHTSA. Strickland was former Transportation Secretary Ray LaHood’s driver distraction consigliere. It looks like the former administrator was none too pleased with Tesla’s shirking of NHTSA’s distraction priorities.

Strickland will be attending CES this week and may have more to say on this subject. Suffice it to say that if Tesla does not fall into line the upstart EV maker may ruin the party for the entire industry – drawing NHTSA into the HMI space. Please, Elon, listen to the bureaucrats. Nobody wants NHTSA in the backseat dictating user interface specifications.

Click here for more on the impact of NHTSA’s revised driver distraction guidelines.

Click here for more on driver distraction research and legislation.


January 3, 2014 18:34 rlanctot

About a week ago I posted a blog debunking a report that Google would announce an automotive consortium at CES ( - Rumors of Android Consortium at CES Greatly Exaggerated) and further asserting that Google would not even be attending the event. Since that post, multiple report have averred that Audi will announce its plans to deploy Android in its cars.

First, Google will have a room for meetings in the South Hall at CES.  Second, there are rumors afoot of an Open Android Alliance comprising the likes of Audi, GM, Hyundai and, maybe, Honda, among others with plans for Android implementation.  Third, it does matter a little bit.

As for Audi implementing Android - at some future date - this is hardly a big deal.  Hyundai beat Audi to the punch in announcing its plans.  The roster of competing car makers adopting Android is growing by the day - mainly because Android offers the prospect of much more rapid development and deployment of new applications thanks to the massive and growing population of developers and Android's increasing dominance in the handset space: Android Captures Record 81% Share of Global Smartphone Shipments in Q3 2013.

In addition, Audi's preference for real-time OS provider QNX means it may be better positioned than most car makers to implement Android.  QNX and Android already have been shown to play well together.  (It doesn't hurt that Audi is using nVidia Tegra processors in many of its cars given Android's resource demands.) The adoption of Android by a growing roster of car makers is not good news, on the other hand, for Microsoft and a host of legacy OS providers.  And even the twin initiatives for Linux adoption in cars - the GenIVI Alliance and The Linux Foundation's Automotive Grade Linux - will suffer from the loss of developer focus.  Then, again, Android itself is based on Linux - so maybe Linux is the winner.

The rapid adoption of Android is a bit embarrassing to the two existing Linux initiatives, both of which are intended to reduce development time and cost for car makers and their suppliers.  Expectations are that developing in and for Android will be far faster and less expensive.

The shift to Android does reflect the growing influence of mobile on the automotive market.  And this suggests that the automotive industry will continue to take its cues from mobile as software continues to grow in importance in cars and as a proportion of the cost of in-vehicle systems.

As for the potential for a consortium, I hope any members of a Google-led consortium are good listeners, because that's what they are most likely to be doing - listening to Google's terms of engagement.  Sign here.  The single biggest point of impact of putting Android into cars is the immediate need for software update capabilities to support that frequently changing OS.  If for no other reason than the need for software updates, Android's introduction into cars represents a key turning point for vehicle connectivity.  Cue Billy Ocean:  "Get outta my dreams etc...."

January 1, 2014 13:00 rlanctot

Next week’s Consumer Electronics Show (CES 2014) in Las Vegas is notable both for what will and what will not be on display. There will be 27 TechZones ( including at least two focusing on automotive technology: Driverless Car Experience and GoElectricDrive. There are also more trendy focal points such as 3D printing, digital health, fashionware, and fitness tech.

What the organizers are missing, though, is the wave of safety and security technology emerging from the nation’s military sector along with the rapid innovation impacting law enforcement and emergency response communities. The most visible contribution coming from the military is the commercial application of drones. Just this past week the Federal Aviation Administration approved six sites for drone testing.

But drones are meaningless in the context of the technological advances that have transformed the modern battlefield leveraging advanced location and wireless technologies, many of which are already propagating through law enforcement and emergency response applications and industries. Moving vehicles and personnel safety through hostile country is a dangerous and expensive proposition and military contractors stand to benefit handsomely from the technologies they have pioneered.

Not only will these technologies not be appropriately highlighted at CES, they will also largely be absent at the North American International Auto Show in Detroit, the following week.  Instead, both the consumer electronics and automotive industries are spellbound by the machinations of Apple and Google. 

This hyper-focus on the Internet leaders is leaving the automotive industry’s flanks exposed.  Real, mission-critical innovation with commercial application is emerging directly from the military.  Is it too late for the Defense Department to get a booth at CES?  We’ll see next week.

December 30, 2013 21:01 rlanctot

Wireless carriers may shift from public service messages (2013’s multi-carrier “It Can Wait” campaign) to off-board policy control to mitigate the impact of smartphone texting on safe driving in 2014. The strategy, if it comes to pass, points toward the use of apps or services, from companies such as Location Labs, intended to block text messages when devices appear to be in use in a moving vehicle.

Blocking of mobile phone use in cars has been proposed many times before, including by the Director of the National Transportation Safety Board, Deborah Hersman, who was a candidate to replace Transportation Secretary (and distracted driving maven) Ray LaHood at his departure earlier in 2013. Blocking of text messages or phone calls is the wrong path to achieving safer driving.

The concept of blocking wireless calls or text messages in cars has been opposed by organizations as diverse as law enforcement officials and the Insurance Institute for Highway Safety. Blocking text messages in cars can prevent the reception (or delivery) of urgent messages related to traffic, weather, or health emergencies or even criminal activity.

Mobile phones represent a bundle of potentially lifesaving technologies in cars broadly summarized as providing contextual awareness.  Contextual awareness itself can be used to manage on-board communications in a moving vehicle, but doing so remotely doesn’t make much sense – especially if the consumer will be asked to pay for the privilege.

Car makers ranging from GM and Volvo to Daimler and Nissan are all building solutions designed to integrate mobile phones into a contextually aware experience in the car. The critical element in these systems, though, is their manifestation on the terminal (the car) and in the control of the driver. Car makers are increasingly making use of connected mobile phones with up-to-date maps to enable safe, accurate navigation and driving experiences – while keeping life-saving lines of communication open to the car and driver.

It is true that the problem of texting and driving is serious. Approximately 10 people a day are killed in “distraction-affected” car accidents in the U.S., according to the U.S. National Highway Traffic Safety Administration. The agency estimates that as much as 20% of these fatalities can be attributed to the use of mobile phones.

The agency has responded with requests to the 50 U.S. states for bans on the handheld use of mobile phones in cars along with bans on texting. The result has been a quilt of compliance with outright text bans in 41 states, and a variety of other measures limiting the use of mobile phones while driving. (Insurance Institute for Highway Safety anti-texting laws map:

But none of these bans are intended to block mobile phone reception, something which is currently being contemplated.The Location Labs application, for instance, is capable of blocking texts according to user-determined (or parent-determined) protocols – particularly for instance when the phone detects usage in a moving vehicle.

Location Labs is a focus of the current development activity since it claims more than 50M installs of its safety applications with more than 1M paying subscribers.  It is not clear how many of these installs include the ability to block text messages, though a VentureBeat article notes: “You could very well be subscribed to its service right now without even knowing it.”

For its part, NHTSA has good cause for concern as texting has exploded in the U.S. and globally with the CTIA reporting 2.19T (yes, trillian with a "T") text messages sent in the U.S. in 2012, a six-fold increase from 2007.  And that text messaging is producing 10's of billions of dollars in carrier revenue, according to Strategy Analytics estimates

  ( - Global Mobile Enterprise Business Application Revenue Forecast, 2011-2017).

Using the smartphone’s contextual awareness to enhance safe driving, as in the case of an application such as Global Mobile Alert's Pull Over to Text and others, rather than setting protocols remotely is the more appropriate approach to solving the texting and driving problem.  Some ideas look too good to be true – and charging customers to provide a service to limit their text messaging (for which they are also paying) is one of those cases. 

December 29, 2013 18:57 rlanctot

It is the expectation of the insurance industry as a whole that all policyholders will eventually be subject to participation in some form of usage-based insurance (UBI) program.

Dave Snyder, vice president of the Property Casualty Insurers Association of America (PCI) and the final speaker at the recent Center for Insurance Policy & Research panel discussion in Washington, DC, made that anticipated outcome and projected objective clear. The goal is to bring UBI and all its benefits to all policyholders.

UBI is no longer a theoretical exercise or a concept being tested. UBI is changing and shaping the thinking as regards vehicle connectivity – ie. telematics - overall. Just as all cars will soon have embedded modems, much like smartphones on wheels, auto insurance will ultimately be tied to this technology as well.

In the U.S. alone there are 26 independent UBI programs, according to Robin Harbage, a director at Towers Watson, an actuarial firm serving the insurance industry. Harbage was the first speaker at the recent Center for Insurance Policy Research (CIPR) gathering in Washington, DC, where the merits of UBI programs were discussed and debated by a panel of six industry experts.

Almost as long-lived (16 years) as the venerable OnStar program (17 years) from GM, UBI offerings have found the strongest following in the U.S. thanks to Progressive’s aggressive implementation and promotion of SnapShot.. Originally known as Autograph when it was piloted, SnapShot is now widely advertised on television in the U.S.

Harbage says nine of the top 10 insurers, representing 75% of the market, in the U.S. now have programs, with 49 states having four or more available programs and Ohio with more than 10.  While UBI programs are ramping relatively rapidly in countries such as Italy (where the eponymous Monti Decree obliged auto insurers to make discounted “black box” UBI programs available to all customers on demand), the United Kingdom (to combat insurance fraud), and South Africa (to reduce theft), the U.S. has forged a leadership position based on Progressive’s low cost approach.

For the insurance industry UBI is all about cost.  UBI is all about using vehicle tracking data to create better underwriting algorithms to reduce so-called “loss costs.”  Loss costs, in the words of the industry’s standards-setting body ISO, “are accurate projections of average future claim costs and loss-adjustment expenses – overall and by coverage, class, territory and other categories.”

For the insurance industry, UBI solutions represent the next paradigm shift in underwriting.  The insurance industry is the only industry that sells a product for which the cost is unknown or, at best, estimated.  The last great shift in the industry came when credit scores came into use as an enhancement to the loss cost estimating process.

Of course, UBI introduces all the same concerns implicated in the use of credit reports including harm to protected classes such as race, gender and income.  The panel discussing the issue at CIPR included Harbage along with Allen Greenberg of the US Department of Transportation, James Bielak of standards-setter ACORD, Sandra Castagna of the Maryland Insurance Administration, Birny Birnbaum of the Center for Economic Justice, and Snyder of PCI.

UBI also introduces privacy concerns and the potential for vehicle hacking, dependent, as the dominant programs are, on the use of devices that plug into a vehicle’s OBDII port.  (The panel did not spend much time debating the merits of permanently installed vs. smartphone vs. cigarette lighter-based vs. OBDII devices or combinations thereof – or even the use of data from embedded systems such as OnStar.)

First and foremost, UBI is important because it is forcing the insurance industry, which has the most immediate and significant financial interest in vehicle connectivity, to sort out the legal issues.  The discussion at CISP focused on privacy, data ownership and data use – the three foundational issues upon which the telematics industry is being built.

These foundational principles were highlighted by Harbage who noted that any UBI program must explain three issues to participating policyholders:

  1. What data will be collected?

  2. What will be done with the data?

  3. What organization(s) will have access to the data?

There are many additional questions implicated in those three – but they represent the core of the value proposition.  Harbage went on to describe what is often perceived and presented as the win-win-win proposition of UBI programs for consumers, regulators and insurers.

Consumers are seen gaining control of their premium along with more transparency and even driving behavior feedback.  Consumers also presumably appreciate green driving dividends from participating in the programs, according to Harbage, along with value added services, which can range from roadside assistance to geo-fencing, among a wide range of other applications.

Regulators and government representatives point to the fact that UBI program participants tend to drive less and in a safer manner, reducing accidents, congestion and emissions.  The use of actual driving data is also seen as a “fairer” means of discriminating risk.

For insurers, UBI programs offer the opportunity to steal the best risks from competitors in a highly competitive and mature market, while also reducing churn – the tendency of customers to shop for better rates and switch their coverage.  The data also has allowed actuaries to understand that certain “miles driven” are 1000’s of times more risky than others, in the words of Harbage. 

UBI programs have also given insurers something new to talk about with existing and prospective customers – rejuvenating the market and stimulating both competition and customer interest.  These two elements, though, have been undermined by the so-far ambivalent approach of most insurers to offering UBI programs to existing customers.  Most insurance brokers in the U.S. discourage existing policy holders from participating in UBI programs – though that may be changing.

The insurance industry’s lingering ambivalence is rooted in a number of factors including the lag inherent in obtaining regulatory approvals, the limitations on the use of vehicle data, the lack of understanding of vehicle data, and the perception of UBI as a discount-only offering.  Layered onto the privacy and discrimination concerns along with the cost of creating the necessary hardware, software and personnel infrastructure and it is easy to see the sources of the industry/s delayed embrace of UBI.

Still, the benefits to insurers far outweigh these concerns.  In addition to the societal positives outlined by Harbage and by Greenberg of the US DOT, UBI programs also lead to substantial reductions in claims, both in amount and severity.  Greenberg estimated that claims reduction at 8% beyond what would normally be anticipated.

Greenberg further noted the connection between UBI programs and the pilot programs (in Oregon and elsewhere) currently testing road use taxing to compensate for declining fuel tax revenues fed in part by the onset of electric vehicles.  Both UBI and usage-based taxes (VMT) are likely to require a module connected to the vehicle.  In a similar vein, Bielak of ACORD noted the forensic potential of UBI devices for determining liability, an application already widely used in Europe.

So the value proposition for insurers seems unmitigatedly positive.  UBI gives insurers a powerful tool to steal low-risk customers from competitors, reduce churn, reduce claims and loss cost, and potentially obtain forensic information from crash scenes while enabling value-added service opportunities.

But associate commissioner Castagna from the Maryland Insurance Commissioners office helped CIPR attendees better understand the obstacles to progress by highlighting the wide range of questions regulators still have with UBI programs including:

  1. How frequently will data be transmitted from the telematics device when the vehicle is in motion?

  2. How long must the device stay in the vehicle to obtain a “valid sample” of driving behavior data?

  3. Where is all data stored, for how long and who has access?

  4. What combination of the data results in a discount?

Castagna had further questions regarding the determination of the discount, disclosures, data usage (law enforcement, claims investigation, marketing, sales), the use of geographic zones based on traffic or business density, notification of discount changes due to driving behavior, and explanation of changes in discounts.  From her statements it was clear that these were not settled matters.

Castagna stated that one of the Maryland commission’s concerns is to try to determine if “increased market penetration of telematics insurance and PAYD programs positively impact low-income households.”

Birnbaum of the Center for Economic Justice (CEJ) shared Castagna’s concern that UBI programs be made accessible to low-income consumers.  The worry is that low-income consumers will subsidize participants in UBI programs while not having access to the same discounts.

CEJ favors the use of mileage-based insurance programs over the prevailing “driver behavior” offerings being widely adopted in the U.S. and elsewhere.  Birnbaum highlighted his concerns as follows:

  1. Privacy issues and use and distribution of data by insurers for purposes other than loss mitigation and pricing, including, for example, insurers using information from telematics in claim settlements when helpful to insurers but not making the data available to consumers when helpful to consumers;

  2. Disproportionate impact of offer and sale of UBI against consumers in low- and moderate income and minority communities;

  3. Failure to achieve meaningful loss mitigation because of black box approach by insurers of collecting data for rating;

  4.  Use of telematics data as merely another data mining exercise following on insurer use of credit information – including penalizing consumers not because of driving behavior but because of where and when they drive as a function of work and housing segregation;

  5. Limited regulatory oversight to date.

Birnbaum says CEJ wants the National Association of Insurance Commissioners (NAIC) to:

  1. Establish data ownership and privacy standards.

  2. Establish standards for permitted and prohibited uses of consumer data.

  3. Collect and analyze granular data on offers and sales of UBI based related to prohibited risk classification factors, including race and income;  Require insurers to include variables for race and income in generalized linear models.

  4. Establish standards for disclosure of telematics results and rating programs to ensure consumers receive feedback necessary to alter behavior.

  5. Replicate analyses presented by insurers in summary form – require insurers to produce all analyses – not just loss ratio as outcome variable, but other analyses using other outcome variables.

And as a final comment, Birnbaum said, “Stop this fiction of discounts-only unless and until the rating factor can be associated with lower overall claims and not simply a redistribution of income.”

The bottom line for Birnbaum is the same as for Harbage – insurers must disclose what data is being gathered and how it is being used.  Additionally, rules of data ownership and protection must also be set and implemented before UBI will be embraced by consumers.

These questions and concerns are the very same concerns confronting auto makers like GM which have been gathering data for years with little or no oversight or regulation.  The task rests with the insurance industry to lay the groundwork for UBI which may well contribute to or, in fact, determine the success of telematics more broadly.

Snyder’s vision of the comprehensive implementation of UBI technology cannot be exaggerated.  As UBI adoption in the U.S. progresses, still estimated at fewer than 2M policies, the adverse selection pressure will grow on insurers as-yet not offering UBI services.  Insurers who fail to explore UBI offerings will not only find themselves providing insurance to customers with the worst risk profiles, they will also miss out on the value-added service opportunities presented by UBI.