The impact of Connected Vehicles on the Insurance sector

Consulting Group The impact of Connected Vehicles on the Insurance sector Insurance Telematics 16 June 2016 - intellectual property

in a nutshell is the first strategy consulting firm focused on telematics and geolocation Our consulting services Our fields of expertise Strategy definition Vision creation, strategic positioning, business plan development, board coaching & support Investment assistance Strategic due diligence, market assessment, feasibility study, M&A, postacquisition plan Procurement strategy Specification of requirements & tender documents, launch of tenders, supplier negotiation & selection Car infotainment & navigation Connected services (Traffic information, fuel prices, speed cameras, weather, parking, points of interest, social networking), driver monitoring, maps, smartphone integration, smartphone-, PND- or embedded navigation, Usage-based charging PAYD / PHYD insurance, road charging / electronic tolling, fleet leasing & rental, car sharing, Car As A Service, etc. Innovation management Value proposition definition, product & services development, architecture design, assistance to launch Business development Partnership strategies, detection of opportunities, ecosystembuilding, response to tenders Implementati on Deployment plans, complex / high risk project & programme management, risk analysis & mitigation strategy Telematics & Intelligent Transport Systems ADAS, connected vehicle, crowd-sourcing, fleet management, ecall, bcall, SVR, tracking, vehicle data analytics (OBD / CAN-bus), VRM, V2X, xfcd Positioning / Location enablement M2M & connectivity 2

in a nutshell 1 Our clients are across the mobility ecosystem Analytics providers Automotive manufacturers & suppliers Mobile telecom operators Applications providers Telematics solution providers ITS operators, regulators & fleets Device / location suppliers Insurers, aggregators & assistance providers Banks & private equity investors 3

Introduction to the 2016 study The 2016 study revealed UBI is becoming mainstream The reference report on the subject, quoted by The Economist, the Financial Times and the Wall Street Journal 1200+ pages of research using: - 286 interviews in 28 countries - 5 years of research performed by 6 consultants in 4 countries - Insights from 25+ consulting projects - Our experience & vision of the ecosystem incl. OEMs and TSPs - 422 figures (charts, tables, etc.) 42 case studies including Allianz, AllState, Carrot Insurance, Vodafone Auto, Ingenie, OnStar- Progressive, Discovery Insure, Liberty Mutual, Octo Telematics, Renault Amaguiz, State Farm, Unipol, Zurich A handbook of 69 suppliers' solutions including our own evaluation and ranking 28 insurance markets profiled 2020 & 2030 market forecasts - Canada, US, Latin America, Europe, Russia, South Africa, India, Chinese and Japan - Personal line / commercial line - Aftermarket / OEM Analyses of the disruptive forces at play - ADAS and autonomous vehicles - The ecall & ERA Glonass mandates - The rise of smartphone apps - Big Data & analytics Targeted recommendations for insurers, regulators, TSP, OEMs and operators * Italy, the UK, France, Germany, Russia and the US 3

and another thing 1 We just published the first global Connected Mobility Forecast assessing 14 markets 200-page quantitative analysis of the mobility market The future evolution of the whole connected mobility sector analysed 18 original graphs encapsulating the essence of the mobility market evolution 57 quantitative analysis graph describing each of the 14 markets Total Addressable Market revealed Separate analysis of the Total Addressable Markets (TAM) size in volume and revenue for each of the 14 car-centric mobility applications. TAM account given from the perspectives of the MSPs and CSPs* 14 comparative analysis of mobility services based on: Delivery, service and business models Value chains and key players Regulatory and competitive environment Connectivity penetration per region Key volume and revenue drivers Current and future market trends Global forecast to 2020 of the volumes and revenues per region 18 countries and areas covered 4800-lines underlying data sheet including: The total addressable market in volume and value seen from the Mobility service providers (MSP)* and the Connectivity Service Providers (CSP) perspective The total underlying volumes and revenues per country The volume and revenue forecasts for the MSP and for the CSP The split between OEM and Aftermarket volumes and revenues * Mobility Service Providers (MSP) and Connectivity Service Providers (CSP) varies per sector 5

Forecast content We just published the first global Connected Mobility Forecast assessing 14 markets 6 * The definition of Mobility Service Providers (MSP) and Connectivity Service Providers (CSP) varies per sector

Connected Mobility Forecast - some results UBI is only one out of many mobility services experiencing rapid growth 100,000 80,000 60,000 40,000 20,000 Total connected services market revenues forecasts ($ in million) Car leasing Car sharing Car pooling UBI ETC Fuel services telematics FMS 0 2015 2016 2017 2018 2019 2020 The car mobility services market will grow to over $350 billion affecting 650 million cars By 2020, 45 out of 80 million new cars will be sold connected worldwide The share of aftermarket provision for all service revenues will reach 84% in 2020 OEMs are embracing mobility None of the 14 services will be provided individually in 2020 At the centre is the ability to access driver and car data Source: Consulting Group 7

Connected Mobility Forecast - some results UBI is only one out of many mobility services experiencing rapid growth 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Penetration of leasing in fleet vehicles and connectivity in leased vehicles worldwide 2020 0% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Connected Non-connected Non-leased Leased 83% 17% Fleet vehicles worldwide 39% 61% Connected leased vehicles Penetration of leasing in fleet vehicles and connectivity in leased vehicles Europe 2020 Connected Non-connected Non-leased Leased 68% 32% Fleet vehicles in Europe 49% 51% Connected leased vehicles The car mobility services market will grow to over $350 billion affecting 650 million cars By 2020, 45 out of 80 million new cars will be sold connected worldwide The share of aftermarket provision for all service revenues will reach 84% in 2020 OEMs are embracing mobility None of the 14 services will be provided individually in 2020 At the centre is the ability to access driver and car data Source: Consulting Group 8

The UBI market today There are now 50% more UBI programmes than in 2013 UBI programmes (rest of world) UBI programmes (Europe) The growth pattern has changed US UK Canada China South Africa Australia Japan Brazil Columbia Malaysia June 2016 December 2013 Italy France Germany Spain Russia Belgium Ireland Netherlands Austria June 2016 December 2013 292 UBI active programmes in June 2016 On top of an estimated 45 trials worldwide, many of those in Europe New markets are opening: Russia, New Zealand, Thailand, Indonesia, Turkey... Singapore Thailand Ecuador India Israel Malta New Zealand Taiwan 10 20 30 40 50 Slovakia Switzerland Turkey Czech republic Hungary Belarus Denmark Greece Norway Portugal Slovenia Croatia The fastest growth last year was in the US now the largest market 6 insurances have now more than 500K UBI subscribers PHYD now leads over PAYD with 78% of North American programmes and 53% of European ones using behaviour based pricing 8 15 23 30 38 45 53 60 Source: Consulting Group 9

The UBI market today UBI is not yet eating to its full potential UBI can work outside the Young Driver segment Italy has 15% UBI penetration and it still growing fast Continued investment from OEMs and Wireless operators The number of Smartphone UBI programmes has tripled since 2013 TBYB is not the only way to introduce smartphone UBI Many of its programmes do not use driver data efficiently Source: Consulting Group 10

The UBI market today Allianz has finally kicked off the Germany UBI market GDV enabled insurers to buy devices together 12 volt CLA chosen: price, compatibility, flexibility Allianz BonusDrive: ecall, bcall, mobile app Allianz Drive: behaviour based pricing with coaching and gamification. Privacy attack protection from data protection commissioners Taiwan association of insurers is following that model Text 11

UBI market trends - OEMs changing role 2 GM has been the first OEM to launch its own insurance telematics solution based on OnStar data Illustration of OEM partnership models VEHICLE PRODUCTION DEVICE PRODUCTION DEVICE INSTALLATION TELEMATICS PROCESS MANAGEMENT DATA MANAGEMENT SERVICE PROVISION DISTRIBUTION 1 2 3 Tier-1 supplier 3 Tier-1 supplier 4 Tier-1 supplier UBI insurer 1 UBI insurer 2 Source: 12 Note: OEMs may partner with different B2B provider offering different part of the value chain in white label

UBI market trends - ADAS By 2030, Europe will have 100 million autonomous vehicles Number of vehicles equipped with autonomous features in Europe (million) 100 90 80 Fully autonomous vehicles Highly-autonomous vehicles Semi-autonomous vehicles 70 60 50 40 30 20 10 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: market forecasts - Note: AVs: Autonomous Vehicles 13

UBI market trends - ADAS Autonomy will evolve step by steps Developments in autonomy will be split by road types OEMs are after the most cost effective way to avoid crashes They focus on city and interurban Drivers risk profiles are not always improved by autonomy Driver monitoring required Tesla is going faster and further than any other OEMs while still in BETA They said level 2 meant feet off! 14

UBI market trends - ADAS Autonomy will evolve step by steps Developments in autonomy will be split by road types OEMs are after the most cost effective way to avoid crashes They focus on city and interurban Drivers risk profiles are not always improved by autonomy Driver monitoring required Tesla is going faster and further than any other OEMs while still in BETA We can all learn a lot from each of the Tesla crashes 15

Conclusion Insurer will need to look outside the blackbox for find data Thank you! Insurance is about to change with less accidents and shift in liability Effectively predicting risks using Big Data is the key differentiator New devices require successful value proposition Car manufacturers partnership will take time and efforts Connected mobility services are a source of data but can also transform your business 23

Consulting Group Strategies for Mobile Companies Brussels - Chicago - Paris - London - Moscow - Hannover - Milan - Boston www.ptolemus.com For more information, contact Thomas Hallauer at thallauer@ptolemus.com