Google and its self-driving cars (SDCs) are scaring the wits out of the automotive industry. There’s nothing major car makers would like to see more than a swift departure of Google from the automotive domain. The next best outcome for auto makers, therefore, is to discourage or delay Google-led initiatives like SDC.

The National Highway Traffic Safety Administration has come to the rescue with guidelines for states in the U.S. that may be considering allowing self-driving cars to operate. (Google has stated that it does not support the NHTSA guidelines.)  These guidelines boil down to:

·         Simple transition from automated to driver control

·         Be able to detect, record and inform driver if the system malfunctions

·         Technology does not disable federally required safety features

·         Records information in the event of a crash

More details are available:  http://tinyurl.com/n2j5rpr

There are currently two paths toward self-driving cars.  One path, the one with which more consumers will be familiar, is the path defined by Google’s autonomous car – and already familiar from multiple DARPA-led challenges where various organizations and university programs create autonomous vehicles competing to cross the desert or operate in city traffic.

The other self-drive car path is based on 802.11p DSRC (Dedicated Short Range Communication) technology – now being tested at the University of Michigan Safety Pilot study - http://safetypilot.umtri.umich.edu/.  DSRC is the technology behind vehicle-to-vehicle and vehicle-to-infrastructure technology intended to enhance vehicle safety by creating a network of vehicle communication for the purpose of eliminating all driver-related collisions or approximately 80%-90% of accidents.

As a result, what is emerging is a private initiative currently “led” by Google – as the first company to put a self-driving car on the road – competing with a vision of autonomous driving ultimately enabled by a government mandated DSRC module.  NHTSA’s recommendation that states only allow SDCs for testing purposes only for the next four years buys time for the auto industry to “catch up” with Google’s massive headstart in the marketplace and the minds of consumers.  (Audi notably has its own autonomous car operating in the U.S.)

While the Google car is notorious for its use of a rooftop lidar device reportedly having a cost of $70,000, the expectation is that the size and cost of this hardware will both shrink rapidly.  Meanwhile, NHTSA is pushing toward the eventual mandate of a DSRC module in every car intended ultimately enable self-driving cars along with a range of other applications focused on safety and traffic management.

The auto industry’s response to Google’s private commercial initiative was evident in survey results released last week at the Telematics Update 2013 event.  The Alliance of Automobile Manufacturers (AAM) released survey results showing that 33% of consumers think the idea of self-driving cars is a good one, but the AAM chose to focus on the 42% of respondents who said it was a bad idea.  A further 24% were unsure what to think.

To this analyst, the idea that any consumers at all viewed self-driving cars as an attractive proposition is big news.  It’s not as if Google launched its car in response to overwhelming demand.  The move was an intuitive one driven by personal experience – more and more people find driving intrusive and unpleasant and will welcome the SDC concept.

The AAM findings go on to report that 75% of respondents said they were very concerned that companies would collect personal data and 70% said they were very/somewhat concerned this information would be shared with the government.  AAM also said 81% of respondents reported they were either very or somewhat concerned that hackers could gain control of self-driving cars.

The irony here is that a Google-type SDC is far less likely to be sharing data with the government or to be exposed to hackers than a car with a government-mandated DSRC module.  Who is a consumer more likely to trust these days:  Google, with whom hundreds of millions of consumers are already sharing their data; or the government (ie. NHTSA), which has recently been caught in a range of over-reaching personal information intrusions in recent weeks.

My money is on private, commercial initiatives, such as those driven by Google, Audi, Continental and other car makers and their suppliers.  The impact of the government mandate approach has been to narrow the field of potential participants in the DSRC space, freezing out innovation and investment.

Further working against the long-term success of DSRC has been the inability of the leaders in the space to find and adopt practical applications for the technology.  In 10 years there has been little or no commercial deployment of the technology.  It appears that even the Federal Communication Commission in the U.S. – the agency responsible for allocating the required spectrum – has lost patience with the NHTSA program – choosing not to “protect” the spectrum from unlicensed use.

The first green shoots of DSRC deployment are beginning to appear, with Kapsch announcing a self-parking implementation for commercial vehicles.  Let’s hope this is just the beginning.  Next steps ought to include deployment of DSRC on emergency vehicles (for intersection collision avoidance – 9,000 people killed annually in the U.S. at intersections) and fleets.  But 10 years of testing with no deployment raises serious questions regarding the management of the DSRC program.

NHTSA and AAM ought to be fostering not discouraging development and deployment of SDC technology.  Telling states to shift into a testing-only mode is hardly the kind of bold innovation-fostering push the industry needs.  With 33% of consumers telling AAM they think SDC is a good idea, it is clear there is a market for the technology.

Simple directives are best.  All NHTSA really ought to say at this point is that a driver must be in the driver seat at all times and the driver is still responsible for the operation of the vehicle.  One sentence, rather than 14 pages of regulatory hoo-hah.

“Fasten your seatbelts, it’s going to be a bumpy night.” – Margot Channing as played by Better Davis in “All about Eve”

It is the evening before my test drive of Tesla’s new Model S, the $100,000 sedan intended to change everyone’s thinking about what an electric vehicle can be or do.  But what the car can be or do is secondary to the impact the company is having on the automobile industry.

What is interesting is that Tesla’s impact has almost nothing to do with the car itself, but it is important to first understand how the car itself is influencing industry thinking about infotainment systems, safety and connectivity.

My test drive tomorrow in Washington, DC, follows an impromptu test drive last week in Silicon Valley.  I did not have the nerve to drive the car, which was privately owned, instead experiencing the naked, neck-snapping EV aggression from the comfort and safety of the passenger seat.

The Model S is a coiled spring capable of reaching 60mph in 4.4 seconds.  Along with that speed comes balance and poise with extra attention paid to steering and suspension. 

Of course, in the automotive infotainment industry the Model S has garnered attention for its 17” center stack display and embedded connectivity.  The display is impressive and the system’s access to streaming audio or Internet radio content sources via the embedded modem is the ultimate in convenience.  (Every competing system in the market accesses the driver’s mobile phone and data plan to deliver these services.)  The wireless access is free for the first three months and Tesla has yet to announce the pricing or pricing tiers thereafter.

More impressive than the convenient access to content, though, is the provision for over-the-air software updates – a capability that Tesla appears prepared to liberally leverage to its advantage.  In fact, the 17” display facilitates the process by detailing the latest software updates to the driver as they occur – usually overnight with the customer’s approval.  (Since first introducing the capability, Tesla has shifted to conducting initial download tests on the marketing fleet before deploying to consumers.)

The embedded modem also allows Tesla to monitor vehicle performance at all times, as was reflected in the recently disputed NYTimes review of Tesla's new East Coast fast-charging network intended to enable a gas-free, electrified journey from Washington, DC to Boston.  Setting aside the details, CEO Elon Musk's use of vehicle data to question the claims of the reviewer regarding his speed and use of HVAC was a revelation to some.  But, as a company representative clarified later to me, Tesla does NOT gather location information, only performance data.  And the customer opt in is purely binary - yes or no - and, with no location data, clearly does not encompass probe data for enhancing traffic information.

There are shortcomings to the Model S infotainment system which are readily apparent from a short drive.  The user interface – tends to default to a vehicle information screen.  Often featured prominently is a Google map which, while driving, may pixilate or disappear entirely based on the quality of the wireless connection.  This is a bit surprising given the fact that Audi has been out for two years already with AudiConnect consistently displaying Google Earth imagery over the Nokia Navteq map thanks to 2GB of cache memory.  Of course, Audi and Tesla currently share a lack of automatic crash notification capability.  (Tesla execs say they have yet to figure out a solution for replacing Google maps for the launch in China.)

What is missing in the homegrown head unit of the Model S, which is based on Linux, is a personalized experience that anticipates the driver’s needs and preferences and/or anticipates driving information needs such as traffic or weather data.  While multiple content aggregators have demonstrated interfaces fusing multiple inputs into a user interface capable of actively anticipating the contextual information needs and wants of the driver, Tesla appears to have put its entire emphasis on vehicle information management and map illustration.

Yet, even in its presentation of map information the Model S lacks 3D graphics or even Audi’s Google Earth.  Also missing is a more advanced safety portfolio leveraging sensors and cameras.  Company representatives say a more advanced safety offering is in the works and the center console display is ideally suited and prepared for such an integration.

But these “complaints” are quibbles, especially in the context of a car that can be transformed overnight by software updates.  The Model S I drove in last week may actually be different, by now, from the Model S I drive tomorrow.

But the real impact of Tesla lies in its distribution and service strategy.  Tesla is selling its cars from more than 22 stores nationwide and has won its first battle with traditional automobile dealers as a Massachusetts court dismissed a lawsuit brought by the Massachusetts State Automobile Dealers Association (MSADA).  The lawsuit claimed that Tesla was in violation of Massachusetts law governing the sales and servicing of cars.

The National Automobile Dealer Association has indicated its intent to support the MSADA’s efforts to challenge Tesla’s sales model setting up an ongoing clash between the massively influential and politically connected NADA and Tesla, which is backed by a combination of deep pockets, green technology cachet and its own political connections.

At a time when antipathy between North American automobile dealers and OEMs is at a peak around the question of facilities standardization and modernization strategies, Tesla presents a disruptive approach to vehicle sales that aligns well with the growing retailing mantra of the Apple Store.  In fact, as part of the NADA’s Phase II report on factory image programs focused on showroom modernization and standardization, the association’s consultant noted Apple’s stores as a touchstone for future store design.  (Tesla hired Apple's former VP of real estate, George Blankenship more than two years with precisely this objective in mind.)

It is no secret that car makers have been trying to steal a few pages from Apple’s playbook with “genius bars” popping up in Hyundai showrooms and with Ford, BMW and GM all adding more in-store personnel/sales counselors to explain new vehicle systems.  But if Tesla is successful in defending its right to sell cars from company-owned stores, a no holds barred struggle could emerge between OEMs and independent dealers in North America.

Further challenging the traditional model is the fact that Tesla showrooms are divorced from the vehicle servicing function.  Vehicles are serviced by independent agents dispatched directly to visit customers.  Tesla has indicated plans, at least in Massachusetts, to open a service location separate from its store, but even this concession is viewed by MSADA as either a violation or a compromise of the law governing vehicle franchises which must have service on-site.  (Tesla is showing its cars in a mall in Natick, Mass.)

So, Tesla is disrupting the automotive market in a number of ways such as:

Including the cost of the embedded wireless service in the cost of the vehicle – though reserving the right to charge for this at some point in the future

Delivering Internet radio and streaming audio via the embedded modem

Delivering seemingly unlimited and endless software updates over the embedded modem

Developing vehicle systems almost entirely “in-house” with only limited support from traditional industry suppliers

Servicing the cars using independent agents

But, most importantly, selling the cars via company owned stores and with little or no service component - since there is almost nothing to service.

With all of the attention paid to Google’s self-driving cars in the past year, one might have concluded that Google was the most disruptive force in the industry.  In fact, it is Tesla that is rocking Motown, Munich, Tokyo et. al. with its fresh-baked, homegrown approach to automotive marketing.

In comparison to Tesla, Google is a virtual lapdog doing everything it can to play nice with car makers offering up Google Maps, POIs, Google Earth, Google Search and even Android as tools for vehicle development.  Even the Google car is seen as nothing more than a marketing platform for Google technology intended for sale to the industry.

Tesla is taking no prisoners and tipping its hat to no conventions as it continues to hit or surpass its own financial and production targets.  The company is selling cars with 25% margins in a market where new internal combustion engine driven cars are sold with single digit margins and dealers hope to make up the revenue on service.  And, like Google, Tesla is sharing its powertrain development with Toyota (RAV4 EV) and Daimler - which provided Tesla with a steering wheel for the Model S.

What should OEMs do?

It is not too late for car makers to update their dealer franchise strategies and business models.  Among the steps that ought to be considered is giving dealers greater flexibility around the manner in which facilities upgrades are funded and approved.  Car makers should recognize the important customer interface role played by dealers and work to lower their costs of doing business (ie. reduce the expenses associated with diagnostic hardware and software) and give dealers access to vehicle data derived from telematics systems.

Independent dealers need to be viewed by car makers as important allies in connecting with consumers.  It is time to put aside the adversarial relationship that is undermining the customer interaction – a relationship that is essential to improving customer satisfaction scores and retention.

It is inevitable that OEMs – particularly in the luxury segment - will seek to open showrooms to match Tesla’s high profile market presence.  But these measures should go hand in hand with supporting the existing independent dealer network.  Whether or how the OEMs choose to walk this tightrope remains to be seen.  In the meantime, Tesla will be opening soon in a mall near you

*A final note on the Model S infotainment system: The car comes with access to Slacker and TuneIn Radio via the embedded modem, an industry first.  Additional apps will require Tesla approval before being implemented.  The system also allows for Web browsing.  More importantly, the nature of the configuration suggests an upgrade path focused on software rather than hardware, since the 17" display consumes so much of the space normally reserved for a more traditional center stack.  Not all drivers will be pleased with the 17" display, which tends to wash out in bright sunlight, but it is fairly stunning at night.  The navigation feedback in the display is supplemented with instrument cluster guidance.  Some customers will be tempted to rip out the standard 17" display and start from scratch - but most will be too jazzed by the car's performance to much care about that kind of radical automotive surgery.

“Gentlemen… We have the technology…” paraphrasing Richard Anderson in character as Oscar Goldman in the opening sequence of “The Six Million Dollar Man.”

In the U.S., three times as many people are killed in accidents that occur at intersections than are killed as a result of distracted driving. The technological remedies for this highway holocaust exist, but traffic authorities continue to be distracted by short-term fixes of dubious efficacy (red-light cameras) and daunting budget barriers.

This issue has particular resonance now that U.S. Dept. of Transportation Director Ray LaHood has announced his departure.  A new director will be resetting the agenda of the National Highway Traffic Safety Administration (NHTSA) and intersection accidents ought to be high on the priority list. 

The issue of intersection safety has implications for fuel efficient driving and the coordination of urban traffic grids.  Some of the key applications for NHTSA’s proposed vehicle-to-infrastructure communication (using dedicated short-range communications – DSRC – technology) are built around the timing of traffic lights to ensure the smooth movement of traffic, the reduction of congestion and emissions, and the prevention of accidents.

Two innovative solutions (and a Federal study), take quite different approaches to meeting these challenges and highlight the use of smartphones and existing wireless technology, while also raising questions about the ability to transition the current fragmented traffic light infrastructure in the U.S. and elsewhere to DSRC technology.  (A more detailed discussion of this issue is available to Strategy Analytics clients at: http://bit.ly/VWQEBx - Vehicle Safety at the Crossroads – Literally.) 

The two solutions come from Global Mobile Alert and Green Driver.  The Federal study is being conducted by the Federal Highway Administration (FHWA). 

Global Mobile Alert has patented (http://bit.ly/XfZCdQ) the use of either an on-board or off-board map accessed by a mobile phone to alert drivers who are using the phone to hazardous conditions ahead including intersections, railroad crossings and school zones.  Alerts and messages to the driver can be tailored to the nature of the hazard. 

Global Mobile Alert has further patented the use of wireless communication between the traffic light and a mobile device to determine the phase of the light in relation to the speed of the car in order to alert the driver, particularly in the event of the mobile phone being in use.  Global Mobile Alert executives envision a variety of scenarios and applications of this patent - but – the fundamental functionality revolves around cellular communication and location technology.

Green Driver, on the other hand, taps into an Internet feed from local municipalities to access signal light timing data which can be fed to smartphones for the purpose of enabling more fuel efficient driving by letting drivers avoid red lights.  But the Green Driver approach can also alert users to red-light runners, as long as those drivers have the app downloaded to an operating phone. 

Meanwhile, the Federal Highway Administration (FHWA) in the U.S. is in the midst of a two-year project to reduce traffic delays by enabling communication between vehicles and traffic lights.  (BMW is a sponsor of the research along with two universities.)  The FHWA estimates that “poor traffic signal timing accounts for 10 percent of all traffic delays – about 300M vehicle-hours – on major roadways alone.”

The FHWA’s objective is to use probe data associated with the deployment of vehicle-to-infrastructure communication to achieve a transformational change in how traffic is controlled.  To quote the study abstract: 

“This part of the study looks at the development of algorithm sequences for a connected vehicle to inform only relevant traffic signals about the vehicle’s proximity, velocity and signal request.  Information is sent from a traffic signal to a cloud-based data center, and then communicated over a 3G/4G network to in-car applications.

“With this data, the car is able to display signal phase and timing (SPAT) information to a driver and, if required, adapt the cruise control in real-time, according to the vehicle trajectory, to get through a signal corridor without stopping.  The technology, called ‘smart cruising’ also allows a driver to choose between reduced travel time or increased fuel efficiency.  Using ‘motor stops automatically’ technology, the vehicle can drive while the engine is switched off, effectively sailing along a corridor.” 

The FHWA’s use of the 3G/4G cellular network for its study reflects the fact that the only intersections equipped, today, with DSRC transponders are associated with a handful of pilots, such as the UMTRI V2I pilot in Michigan.  Global Mobile Alert takes the map-as-a-sensor approach to alerting drivers to intersections, but has also provided for RF communication between the car and infrastructure to support intersection alerts to drivers via the smartphone.

Green Driver’s work in connecting with the IP-based SPAT information of local municipalities (the company is currently operating in Eugene and Portland, Oregon; across the entire state of Utah; in the Dallas suburb of Garland; and in San Jose), has revealed a significant degree of fragmentation in traffic light systems and infrastructure around the U.S.  Some cities are online and able to “play ball” with Green Driver – sharing their SPAT info.  Other cities are able to share, but decline to do so.  Still other cities simply do not have the capability due to the limitations of the back-end systems or the physical roadside infrastructure. 

All three approaches – each targeted at different problems – are built around existing wireless technology.  Both Global Mobile Alert and Green Driver are essentially using the map as a sensor.  Green Driver obtains the SPAT data via the Internet while GMA proposes the use of cellular communication from the traffic light to obtain the timing info.

The new leadership at NHTSA has an opportunity to prioritize the reduction of intersection crashes and fatalities around a market-based approach based on existing technology.  Smartphones, map data, the cellular network and Internet connectivity ought to be leveraged to put into the dashboards of drivers the traffic light location and phase status necessary to improve the efficient management of traffic, reduce congestion and polluting emissions, and prevent fatal accidents. 

The Insurance Institute for Highway Safety (IIHS) continues to advocate for the efficacy of red light cameras to reduce red-light running and related accidents citing its latest research on installations in Virginia.  Not only do the IIHS findings conflict with more rigorous studies conducted by traffic authorities and universities everywhere from California and New Mexico to Virginia and New Jersey, it is by now clear that red-light cameras are nothing more than a revenue producing distraction and an invasion of privacy.

Red-light cameras do not even put additional officers on the street better able to focus on more important law enforcement matters.  In most deployments, officers must review and approve the citations – shifting the burden rather than conserving resources. 

We, indeed, have the technology to save lives, reduce congestion and emissions, and enable the safe, smooth flow of traffic through intersections.  And the best news of all, we can achieve all these objectives with market-oriented implementations of existing technology. 

“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?

The U.S. National Transportation Safety Board (NTSB) released its 2013 “Most Wanted List” of solutions for transportation hazards including everything from enhanced pipeline safety to improved safety for airport surface operations. Near the bottom of the list were three items relevant to the automotive industry: reducing distracted driving in all environments, reducing impaired driving and mandating collision avoidance technologies.

The announcement from the NTSB is reminiscent of what Abraham Maslow said in 1966: “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” I believe this statement accurately characterizes the NTSB’s position - replace "hammer" with "mandate" - but it only hints at the potential negative consequences from mandating safety technologies.

The concerns of the NTSB are significant and worthy of note.  While annual highway fatalities have been in a steady decline for the past decade, the U.S. still sees approximately 100 fatalities per day on its roads.  This is clearly not acceptable.  According to NTSB estimates 10,000 lives are lost annually to impaired drivers – the single greatest source of death and injury on the road. 

The National Highway Traffic Safety Administration (NHTSA) has developed a much quoted figure of 3,000 annual fatalities from distracted driving most often ascribed to the use of smartphones.  NHTSA representatives have stated publicly they are seeking better metrics for this phenomenon, but executives at the NTSB have already voiced their preference for a ban on mobile phones in cars – something which is opposed by the automotive industry and the Consumer Electronics Association among other interested parties.

The NTSB further estimates that run-off-road, rear-end, and lane change maneuvers account for 23%, 28%, and 9% of highway accidents, respectively. The agency says collision avoidance technologies can prevent these types of accidents - or 60% of the total.

NTSB cites data from the Insurance Institute for Highway Safety for its claims that mandating collision avoidance technologies will prevent crashes and save lives.  NTSB says the IIHS “estimates that forward collision warning can prevent 879 fatal crashes annually for passenger vehicles and 115 fatal crashes annually for large trucks. The (IIHS) estimates that lane departure warning can prevent 247 fatal crashes annually, and electronic stability control, 439 fatal crashes annually.

There are a host of issues raised by this call for a mandate and I have an alternative proposal.  First, the problems.

1)      The NTSB’s call to mandate collision avoidance technologies has immediately put automotive industry lobbyists on the defensive, although some have actually already gone into attack mode.  Unfortunately, the predictable path of resistance lies in decrying the high cost of fulfilling technology mandates, which will translate as more expensive vehicles.  The agency has responded that the industry cost estimates are too high and they will decline over time anyway.  The real problem here is that it puts the automotive industry in the awkward position of arguing indirectly or directly over the value of saved lives.  This is unproductive and corrosive to the regulatory process while introducing an undue level of emotion and exposing, inaccurately,  the auto industry as possessed of a callous disregard for human life.

2)      The IIHS as a source of statistical validation is hardly a disinterested party, funded as it is by the insurance industry.  In spite of the IIHS findings regarding the efficacy of certain safety systems, consumers have seen little reward from their insurers in the form of lower insurance rates for cars equipped with these systems.  And the IIHS was not nearly as sanguine as the NTSB regarding lane departure warning, which the IIHS said, earlier this year, can harm rather help avoid accidents, in the organizaton’s own words.

3)      The mandate process itself will require years of testing to determine the efficacy of these systems for preventing crashes and fatalities.  Even if the NTSB and the industry could agree that something should be done, each technology will require extensive testing and review virtually halting existing development in the industry - which is currently moving at a rapid pace - for fear of selecting the “wrong” solution.

4)      NHTSA has already set out a target of crash avoidance and is rewarding car makers with higher safety ratings.

Here are my modest proposals for resolving this scenario.  My ideas are market driven although they will benefit from

endorsement or implementation within the existing regulatory framework.

1)      Require insurers to offer discounts for vehicles equipped with the very safety systems for which the agency is seeking “robust” industry adoption.  It’s almost impossible – if not actually impossible – to find an insurer willing to offer a discount on a Volvo equipped with City Safety collision avoidance.  If this is a life-saving technology, it is time for the insurance industry to put its money on what its data has validated and it may also be time for the NTSB or some other regulator to compel such action.

2)      We are currently at the outset of the World Health Organization’s Decade of Action for Road Safety.  There couldn’t possibly be a better time for the NTSB, perhaps in concert with NHTSA, to set forth a set of targets along the lines of the Corporate Average Fuel Economy standard of 54.5 miles per gallon by 2025.  The automotive industry howled when the 54.5 mpg standard was first proposed, but has now agreed to go along.  Could the U.S. put together individual car maker targets for lives saved/deaths prevented?  Could the NTSB and or NHTSA build a database intended to identify best practices in vehicle safety system design?  Could auto makers be forced to take more responsibility for the actions and behaviors of their drivers?

3)      How about tax credits for new cars equipped with specific qualifying safety systems?

4)      It is worth noting that car makers are already bringing a wider portfolio of safety systems to more and more of their cars at lower price ranges.  Market conditions suggest that mandates at this time are almost completely unnecessary and, if anything, will only slow adoption and deployment.

There are a lot of ways to save lives and there are a lot of lives to be saved.  Mandates aren’t the only path to less motor vehicle bloodshed.  The government and insurers should recognize and reward those car makers that have made the greatest progress in ending highway mayhem.  And drivers, too, should be rewarded for choosing safety.

Why is Pohanka telling customers to come on in for service without an appointment? The first ads I noticed were for Chevrolet, but it soon became clear that Pohanka was making the same offer for all of the brands in its Portfolio including Honda, Toyota, Lexus and Acura. (The offer for Chevrolet is especially surprising given the OnStar Vehicle Diagnostics Report, which ought to allow dealers and consumers to anticipate needed service and schedule visits in a more predictable manner.)

The offer: “No Appointment Necessary” for service. Just drive in. In fact, Pohanka of Salisbury (http://youtu.be/GeVRCmH7bUE - Youtube) goes so far as to offer free Wi-Fi, shuttle service and refreshments.

On its face, the offer is a wonderful customer-friendly proposition. The message conveyed in the advertising: Bring your car in, regardless of what is wrong, and we will fit you in right away. You can then kick back, fire up your portable computer or tablet and set up your office in our waiting area while you have a coffee or soda or maybe even a snack. We will do our best to figure out what is wrong with your car and try to fix it on the spot.

There are so many things wrong with this proposition that it is hard to know where to start, but I’ll give it a try.

1.      Dealers need to manage their business.  The only thing worse than having idle service bays is having customers come in at unpredictable times with unpredictable vehicle problems.

2.      Dealers make money from service.  For most dealers, the service operation is the life blood of their viability.  It is where they make money.  Selling new cars is a more or less break even proposition.  For dealers to have to advertise to consumers to bring their cars in suggests a vision of a bunch of idle wrench twisters hopelessly looking for and pleading for something to do.  (Maybe the cars aren’t breaking down?  Yeah, right.)  Something must be very wrong for dealers to advertise in this way.

3.      My dentist makes me wait.  My accountant makes me wait.  Everyone makes me wait.  My dealer used to make me wait.  What’s changed?  The service cycles for preventative maintenance are growing, so it is true that consumers have less reason to pay frequent visits to dealers.  But, at the same time, cars are lasting longer and consumers are holding on to them longer, according to R.L.Polk (http://bit.ly/Z9VKgQ - Length of Vehicle Ownership Hits Record High).  This means that consumers are likely shifting their vehicle servicing to independents (a fact borne out by studies from the Automotive Aftermarket Industry Association) and/or deferring service.

A couple of things could be happening at Pohanka dealerships.  Perhaps the company has decided to up its game by changing the message from one of playing hard to get (“We can see you next week.”) to an open door (“Come on in!”).  I actually welcome that message as a vehicle owner with not infrequent needs for vehicle service.  And I DO respect and appreciate the offer of Wi-Fi access and snacks, though I’d prefer a loaner car to get back to my own office.

I am concerned, though, that the offer actually reflects what is wrong with the automotive industry and something that is putting the health of 30,000+ new car retailers at risk.   With no direct connection, via OEM telematics systems or connected smartphones, to their customers, dealers are forced to take a blunderbuss approach to marketing.

New car owners in the U.S. are familiar with the post card marketing used by most dealers targeted at scheduled service benchmarks normally based on estimated vehicle usage.  GM, BMW and Mercedes have taken the first tentative steps to allow dealers to be notified of mileage thresholds triggering scheduled maintenance.

A new solution based on connectivity and tied to interpreting vehicle data is required.  Dealers shouldn’t have to resort to the equivalent of hitching up their skirts by the side of the road.  Dealers need a more scientific and targeted model built around vehicle connectivity.

Vehicles throwing off error or failure codes should be communicating those codes to OEMs, dealers AND the consumer.  In fact, on-board service scheduling like that enabled by xtime on BlueLink-equipped Hyundai vehicles is the new benchmark for customer integration.

In the future, connected cars will enable connected dealers to plan their marketing campaigns around the status of their “fleet” of connected cars.  This kind of planning will enable more efficient use of fixed assets – those service bays – and timely ordering of the necessary parts.  Dealers will also be better able to go after deferred maintenance opportunities.

At the recent SEMA/AAPEX gathering in Las Vegas multiple aftermarket players showed smartphone- and OBDII-based systems for interpreting vehicle diagnostic codes for the purpose of capturing service opportunities.  (http://bit.ly/RNpYne - AAPEX Seminar: Telematics presents the automotive aftermarket new challenges and opportunities)  OEMs may be making progress, but the aftermarket is not sitting idly by.

It’s still early days for bringing dealers into tighter communication with their customers.  But this Pohanka come-on-down offer is a sign of the coming apocalypse for any OEM that is not working to better connect the dealer to the customer and the car, or any dealer that is not investigating aftermarket customer connectivity propositions.  Until this problem is solved, I’ll be popping in to my Pohanka dealer without bothering to call, sucking down a few sodas and soaking up the free Wi-Fi.  But as an industry, we can do better.

Sometimes a company does something so wrong-headed it is impossible to ignore. The normally very clever executives at Scosche - pioneers in automotive infotainment system integration - have announced their plans to re-enter the car stereo market with a head unit that enables use of the mobile phone as a remote control, according to a report in the CEOutlook newsletter (http://bit.ly/RbDe4k - Scosche Debuts Car Radio at KnowledgeFest). Even worse, Sony has similar plans for 2013.

At a time when U.S. government regulators are threatening to disable the use of mobile phones in cars altogether to mitigate distracted driving, Scosche is launching a system that encourages the driver to use his or her mobile phones as a remote control for the car stereo. The whole objective of OEM automotive engineering efforts around integrating mobile phones in the car for the past eight years or more has been to shift control of the phone to the vehicle HMI.  The over-arching message to consumers: Don't touch your phone when you are driving.

Somehow, Scosche has seen fit to affect an industry U-turn to shift control back to the phone. Scosche has also somehow missed the tidal wave of headlines pronouncing the imminent arrival of Apple’s Siri voice interface for automotive aftermarket integration, along with competing solutions from Nuance, AT&T and others.  The goal, again, control the phone with the vehicle HMI - steering wheel controls, voice, head unit touch screen, hardware controller.

The only possible good news perceivable in this announcement is that it will shine a white hot light on aftermarket remote controls and, maybe, clarify the need for some industry soul searching as to the efficacy of these systems in a voice-enabled in-vehicle interface future. I have a lot of respect for Scosche and I am confident they will recognize their bungle and get a Siri or some other kind of voice-based interface in the box with their new systems before they launch.

Tuesday the European Parliament adopted a resolution calling on the European Commission and the Member States to make sure the eCall system will be installed into every new vehicle by 2015. The absurdity of this proposition grows with each passing day and yet the EC refuses to acknowledge and accept its increasingly obvious irrelevance.

With the ubiquity of mobile phones and the crowded condition of most European highways, the likelihood of a crash causing serious injuries and going unreported is slender at best. A smartphone-based solution along the lines of what Ford and Daimler have proposed will not only provide an immediate solution available to all new car buyers, but will also enable a more robust system capable of delivering far more than the minimum set of data specified in the in-band modem-based eCall standard.

A more immediate concern for regulatory authorities will be to ensure the availability of emergency response personnel and equipment and to prepare public service access points (PSAPs) to receive the widest possible range of communications from the accident scene including phone calls, text messages, voice-over-IP communications, and video. As things stand, the majority of PSAPs are not even equipped to receive the minimum set of data via in-band modem transmission.

Instead of offering a proposition capable of immediately saving lives, the EC continues to bury its head in the sand refusing to accept the disruptive impact that mobile phones have had on emergency communications. The EC is mandating the use of in-band modem, data-over-voice, technology that the majority of European PSAPs are simply not equipped to receive and interpret. Meanwhile, private eCall solutions from PSA, BMW and Volvo are already in place in most, though not all, of the 27 EU member countries.

The EC’s insistence on an embedded modem guarantees that car makers will be compelled to provision two modems on most cars, if they choose to offer their own diagnostic and customer-relationship targeted devices. OEMs will want to deploy embedded LTE technology for product life cycle reasons, once it is available and coverage is adequate. A 2015 mandate will likely force car makers to implement existing modules for eCall, hence the prospect of a dual modem scenario.  (Renault's launch of R-Link, with its EDGE modem, is a classic example of this phenomenon, providing an app store but no diagnostics or automotic crash notification.)

Smartphones as one eCall alternative; and what about privacy?

The immediate challenge ought to be to assist car makers in bringing whatever system they can to market to solve the problem – including smartphone-based solutions such as those from Ford Europe and Daimler. In other words, the EC ought to back off on the technology mandate and simply require automakers to select whatever solution is suitable to fulfill the emergency notification and minimum data set requirement.

As the eCall debate has played out over the past decade, the growing inappropriateness of the mandated technology has only become magnified by changing wireless communications technology and growing concerns regarding privacy. When the debate over eCall began, LTE was barely on the radar of automotive planners. Today, LTE is a primary concern for OEMs planning to embed modems in their cars all over the world.

The eCall mandate, which was originally seen as opening the door to enable a wider range of embedded telematics services, is now morphing into a separate standalone module destined to provide a redundant and outmoded vehicle connection. Today. no car maker seeking to provide access to emergency services via an embedded modem will want to have that provision managed by a device using in-band modem technology.

In the United States, where so-called Next Gen 911 technology is being contemplated, there is no public authority talking about a “minimum set of data.” The focus of regulators and safety advocates is clearly on enabling the most complete access to accident scene information, particularly via the mobile phones of the affected parties. The NG911 agenda is intended to ensure that PSAPs are prepared and equipped to receive all forms of data and voice communication. And there is no requirement at all for car makers to embed a device.

Sixteen years after the launch of OnStar it is clear that the emergence of the mobile phone obviates the need for an embedded device. (Just imagine for a second the responsibility and liability implicit in a failure of an eCall module to perform in a crash. The legal implications are enough to give one pause although I am sure the disclaimers have already been crafted.)

LTE deployment changes everything

Europe is already behind the telecommunications technology curve with its plodding rollout of LTE technology relative to North America and Asia. Once a global wireless leader, the EU’s wireless network strength has been leapfrogged leaving the region mired in battles over roaming charges and, now, an antiquated eCall mandate.

Rather than fostering a robust debate about how best to leverage LTE technology and smartphone connections to save lives in automobile crashes, the EC continues to stick to its eCall guns. This obstinacy continues in spite of studies conducted by NXP Semiconductors and others showing the superiority of even SMS technology to the anointed in-band modem solution.

Finally, the emergence of privacy issues has further doomed eCall, but the EC refuses to acknowledge the obvious. At some future date – with a fully rolled out eCall solution – cars will call public service access points directly. Still unclear is whether or how the car maker, the car dealer, the insurance company or the next of kin will be notified in the event of an injury or fatality. There is no provision within the eCall mandate for any of these parties to be notified of the condition of the car and its occupant(s). There isn’t even a provision for notifying next of kin.

In the end, car makers are likely to feel compelled to embed their own modems for vehicle diagnostic and customer relationship management purposes, while car dealers and insurance companies may seek to plug in their own modules. Instead of a single module vision of vehicle connectivity – eventually to be joined by a V2X add-on once standards are converged – the EU will yet again be at a disadvantage in the vehicle connectivity game – hobbling European car makers with a well-meaning mandate more than 10 years in the making that has yet to save a single life.

It may be crass to point out, but the scene of an accident is a huge economic opportunity for the insurance company, the dealer and the OEM. Accident aftercare is a multi-billion dollar opportunity and one to which embedded telematics holds the key. The sooner the EC aligns itself with the economic interest that is at stake, the sooner real understanding and progress might be achieved.

A single point of call dispatch

The only way the EC could possibly rescue the ill-conceived venture will be to institute a single PSAP strategy providing an EU-wide dispatch capability along the lines of the solution adopted by the U.K. and proposed by Russia for its own eCall system. Of course, such a system will be expensive and difficult to justify. No, clearly the EC feels it is far easier to simply push the problem onto already financially burdened car makers. (Which OEM is shutting down European production THIS week?)

But a simpler solution lies in the mobile phone. If the EC were to finally and definitively accept smartphone integration as a solution supporting eCall functionality it would resolve the conflict in a flash. With such an approach the organization will also be opening the door to a far more robust emergency response solution.

The typical smartphone today comes with a quad-core processor, compass, accelerometer, magnetometer, gyroscope and GPS. In fact, the average smartphone has the sensor equivalent of a military-grade unmanned aerial vehicle’s avionics system. Add front and back cameras, voice recognition and access to cloud services and you have a remote diagnostic and communication package capable of acting as a remote crash scene assistant.

Instead of exploring the possibilities of smartphone connectivity for enabling and facilitating emergency response, the EC continues to insist on its narrow, retrograde approach to technology: the in-band modem. Leveraging the smartphone – perhaps requiring that it be firmly fixed in the car in some fashion – will also quiet the qualms of European wireless carriers leery of adding modules to the network that will add stress but no revenue.

(The GSMA has gone so far as to make the ridiculous proposal of a “dormant SIM” to address this stress-with-no-revenue concern. No OEM is interested in installing a dormant SIM in its vehicles regardless of the benefit to the carrier.)

The single occasion where an embedded communication device might come to the rescue of a driver – ie. in the event of a crash that takes place outside of a populated area – is precisely the circumstance where the embedded module is likely to fail to find a network. And in that event, should a passing motorist see the crash, they are less likely to call, since they will assume the call has already been made by the vehicle.

A smartphone with a proper vehicle connection is the more suitable solution for car crash emergency response in the absence of an embedded solution. The EC should make explicit provision for smartphone connectivity along the lines of Ford and Daimler systems and then focus on bringing the PSAP network up to a higher and more uniform standard for receiving crash scene voice and data.

Implications

An EC mandated eCall module is destined to become a single-function device burdening European OEMs with unnecessary cost and redundant functionality with little benefit to carrier or car maker. The sooner the EC abandons this folly, the better.

If the goal is to save lives and to speed emergency response to crash scenes the swiftest solution to the problem lies in smartphone connectivity. The EC can retake the global emergency response initiative and achieve a measure of wireless communications leadership were it to adopt a smartphone solution to this problem.

Only by removing itself from the process of defining the technology to be used to solve this problem will the EC truly stimulate competitive innovation in the marketplace. The most helpful contribution the EC can make will be to develop a program for a single point of dispatch and foster technology development and adoption for the PSAPs themselves.

In an ideal world, cars should only require a single connectivity box suitable to fulfill all forms of connectivity functions thereby limiting the number and variety of supporting hardware and software systems for gathering and transmitting vehicle data in a secure manner. With the onset of LTE, OEMs will want this module to handle embedded emergency functions but continental deployment of LTE is yet in its earliest stages – all the more reason to leave the eCall function to the smartphone for the time being.

Insurance Telematics London 2012 represents a unique opportunity, this week, to discuss in open forum the suddenly center stage issues related to establishing industry standards for insurance-related applications. While the focus has lately been on reducing whiplash claims in the UK, there is a wider range of issues including data portability between carriers, standards for implementing different types of usage-based insurance, discounts/incentives/requirements for safety system installation and new ways of using vehicle data to improve underwriting.

Many of these irons are already in the fire. In the weeks leading up to the event, Wunelli abandoned an industry “think tank” after finding universal support among insurers for an industry data standard.  Just last week the Association of British Insurers created what it called a “telematics committee” headed by Ageas’ managing director to get its arms around the issues and opportunities bound up in insurance-related telematics solutions.

The implications of these inquiries and initiatives go well beyond the shores of the UK.  Standardizing the collection and interpretation of vehicle data for insurance purposes has potential application to both insurance and vehicle telematics applications around the world.

The initiatives described above follow by a couple months the now-famous insurance summit at 10 Downing Street where the UK government and insurers agreed to explore the use of telematics systems to help reduce whiplash claims and the related increase in the cost of insurance.  Wunelli chairman Sandy Dunn captured the moment best when he was quoted: “And it’s clear from the response we’re received that the industry recognizes the need to move quickly to rensure we establish standards for the quality and security of data and the way data is collected in order to optimize the future benefits for customers and providers of telematics-based insurance products.”

As discussed in a previous blog post (http://bit.ly/yRukTp - Will UK Turn to Telematics to Fix Auto Insurance Woes?) the UK has been hit by uninsured drivers and fraudulent whiplash claims representing as much as £2B.  Whiplash claims are estimated at 1,500/day adding £90 to the average auto insurance premium.

Proposals suggested by the ABI include:
• A system where whiplash claimants receive no compensation for alleged pain and suffering (general damages) unless there is objective medical evidence of injury.
• Capping or reducing the level of damages for whiplash claims.
• Having a panel of independent doctors to assess whiplash claims, rather than the claimants GP.
• Greater use of bio-mechanical evidence that might enable the introduction of a speed threshold under which there would be a presumption that whiplash has not occurred.
One of the potential outcomes of a standardization effort may be the broader acceptance of event data recorder inputs from aftermarket devices for forensic analysis of crash data.  What began as a device targeted at theft deterrence and the fleet market has evolved into UBI applications and, now, is taking on EDR functionality.  A single aftermarket device can now be used by an insurer to prevent theft or recover a stolen car, provide discounts based on driving behavior, and diagnose the causes of accidents, reducing the rate of fraud claims.

While reducing whiplash claims is the focus of these standardization efforts, those efforts should not stop at UBI devices.  The government can use the opportunity of the whiplash debate to take up the issue of enabling and encouraging the wider adoption of crash avoidance systems.

Few, if any, UK insurers offer discounts for crash avoidance systems such as Volvo’s City Safety technology.  These systems have been proven to reduce claims as much as 20% by the Insurance Institute for Highway Safety In the U.S., and yet there is not insurance discount to the customer that elects to purchase these systems.

But the industry need not stop there.  What if car companies with embedded telematics systems could sell the vehicle data to the insurance company, thereby obviating the need for an aftermarket device?  At a recent Telematics Update event in Munich representatives of Fiat and Volvo both indicated a willingness to participate in such a scheme.

Standardizing data will better enable the portability of UBI insurance coverage between carriers.  Is the industry prepared to empower consumers by letting them own their data and take it with them from carrier to carrier looking for the best deal – something that will be facilitated by data standards.

And, finally, what if standards were agreed to regarding in-vehicle user interfaces that correlated directly to UBI insurance discounts.  Such standards could allow a driver to limit his or her use of mobile devices or touch screen interfaces in exchange for insurance savings.  Airbiquity has created just such 'dashboard"-type tools for customizing the interfaces of existing systems.  The Airbiquity solution is capable of allowing a car maker, insurer or the customer him or herself to manage the policies governing in-vehicle interfaces.

Implications

The insurance industry’s embrace of standards promises to slay the dragon of fraudulent whiplash claims but, more importantly, it is opening the door to a wider range of industry reform that promises to save lives and money.  The insurance industry has the ability to provide the kind of incentives that will mobilize consumer adoption of safety technologies at the same time that it is creating a more attractive underwriting environment.

Of course standards also promise to raise the transparency level of an already fairly transparent UK insurance industry.  But Wunelli is raising the bar with the relaunch of the Comparethebox Website – enabling consumers who are already fitted with a telematics insurance system to compare the rates of competing providers.  Further innovation in this direction can be expected.

In the midst of all of the insurance telematics enthusiasm it is important to remember the nature of the UBI advantage.  UBI insurance provides for greater underwriting accuracy and helps insurers hang onto their best customers, while poaching those same attractive customers from competitors.

The UK is fairly unique in its embrace of surrendered privacy for both public and private puroses.  This behavioral aspect is manifest in the thousands of cameras installed along roads and in public places. 

Still, it is important to keep cause and effect carefully sorted.  The Co-operative has a release out claiming a reduction in car crashes of 20% thanks to the use of “smart box” technology.  Since UBI insurance customers are self-selecting it is perhaps best to be more careful about drawing statistical conclusions between those insured with telematics-enhanced policies and those not.

The most important objective of any UBI scheme is behavior modification, as suggested by The Co-operative’s findings.  More often than not, though, UBI insurance products attract a combination of good drivers (most likely to benefit from the discounts) and not so good drivers (who either cannot afford or are legally compelled).

Effective UBI programs should include data reporting tools available to the drivers themselves.  Wider application of UBI will make it possible for all drivers to benefit from learning more about and thereby potentially modifying their driving behavior in the interest of an insurance savings.