Hi, it’s your car!

According to the consulting firm McKinsey, “today's car has the computing power of 20 personal computers, features about 100 million lines of programming code and processes up to 25 gigabytes of data an hour.” Despite all of that, the features noted above mostly serve simply to maintain the vehicle’s internal operations.

Given that we are constantly connected through our mobile devices, the automobile industry is beginning to explore the opportunities that our wireless world is providing. Now is a good time to ask what the future might hold for the connected car and what the implications are for insurance.

Put your imagination to the test

You could describe a connected car as a car equipped with its own wireless internet network which allows it to exchange information and data with mobile devices. From there, the possibilities are endless!

For example, a car could soon have the ability to notify you in real time if it gets vandalized or damaged after you have parked. It could send you driving statistics, alert you if you exceed the speed limit, signal when repairs are needed and provide plenty of advice. Your car could even communicate with other vehicles to help avoid accidents or dangers ahead.

What’s at stake?

One consideration is consumer privacy concerns. The industry has to make sure that any data collection is conducted in a way that protects user information. Forbes magazine has pointed out a number of other major obstacles to the development of connected cars. First is the lifecycle gap: the design and production cycle is typically slower in the automobile industry, making it hard to keep pace with rapidly changing mobile technologies.

Then, there is the introduction of safety laws, which dictate connectivity, the quest for partners in the mobile industry, the changes in the sales model that will arise with the growing need to educate customers, and the advent of the sharing economy that is shaking up consumer practices.

So the automobile business will have to make some major shifts to adapt to the wireless world. Despite some temporary roadblocks, the industry is in gear for change: by 2020, 90% of cars will be connected.

Connected cars and insurance

The insurance industry has begun to contemplate the possibilities of connectivity. Many secure applications and devices already exist, such as the pay-as-you-drive automerit program, which involves installing a device to measure specific driving behaviours: acceleration, braking, and the times of day when the car is driven. Participants get a discount for enrolling in the program and can benefit from additional savings based on their driving habits.

“We will certainly see an increase in connected cars in the coming years and they will enrich the driving experience,” says Jason Patuano, Director of Communications at belairdirect. “Our priority is the security of consumers and their data. This concern is already front and centre in our existing programs. One of the advantages of this development is that we will continue to get a clearer picture of how our customers drive and we will be able to provide insurance coverage tailored to their needs. Connected cars open up a realm of new possibilities and we will be keeping a close eye on all the developments as they unfold, while pursuing our own business innovations with our customers’ needs in mind.”

Connected cars are sure to have an impact on the insurance industry, so we’ll be following their progress with much interest!