Fueled by technology and changing consumer behaviors, the automotive industry continues to evolve rapidly. From connected vehicles to subscription services, many automakers are expanding the products they offer and developing new revenue streams. Among those, some original equipment manufacturers (OEMs) are offering auto insurance as a way to extend their relationships with vehicle owners and improve the overall customer experience.
With growing bodies of data and enhanced technology, automakers can offer consumers a convenient way to purchase auto insurance while they are buying, financing, or even servicing a vehicle, says Rob Spencer, president and COO of Toyota Insurance and vice president with Toyota Motor Credit Corp. As an example, Toyota enables customers to secure and customize the company’s branded insurance through a partner insurance carrier or to access insurance through a broad panel of insurers.
Our efforts are focused on improving the owner’s experience by improving the insurance experience,” Spencer explains. “Insurance is such a big part of car ownership that it plays a large role in customer satisfaction.”
As auto industry profit pools continue to shift toward services, captive finance companies have an opportunity to position themselves as essential profitability drivers, says Jeff Paul, managing director and leader of the U.S. Automotive Captive Finance Sector for Deloitte Services LP. “Insourcing insurance operations and innovating insurance products could play an important role in fueling growth,” he says.
Spencer recently discussed with Paul how Toyota is seeking to meet customers’ insurance needs, leverage data to deliver greater value, and ultimately build brand loyalty.
Paul: How are data and telematics used to innovate insurance?
Spencer: The connected technology that is common in vehicles today can produce a great deal of data regarding vehicle operation, which can be used to improve vehicle safety, performance, and maintenance over time. When vehicle owners permit us to gather data on their driving behavior, it enables them to demonstrate good habits that can save them money on their insurance.
If we can anticipate our customers’ needs at every stage of their ownership experience, not just when they are buying or servicing a vehicle, it can help elevate brand loyalty.
— Rob Spencer, president and COO of Toyota Insurance
As an example, there are certain driving behaviors that are associated with safe driving, such as the number of miles a vehicle is driven and how much driving occurs during the day versus at night. Additional data points include vehicle speed, the rate of acceleration, and the rate of braking. With the vehicle owner’s permission, insurers can analyze these types of data points and provide discounts to drivers whose data suggests they are demonstrating safe driving behaviors.
How does giving vehicle owners the ability to purchase insurance enhance their experience?
Using the speed and ease of digital technology, we can enable customers to shop, quote, and purchase insurance for their vehicles in as few steps as possible, which can save the consumer time and money. The effort typically required to purchase insurance, which is mandatory in many states, can be significant. If we can use our scale and our digital technologies to help customers with this important aspect of owning and operating their vehicle safely and responsibly, it makes good business sense.
By integrating insurance into the vehicle owner’s experience and leveraging telematics, many aspects of an insurance claim may also be streamlined. For example, if a driver is involved in an accident, data and technology can help initiate the claim and repair process and make the vehicle owner aware of locations where the repairs can be completed. It also gets drivers back on the road faster so they can go about their lives, further removing a pain point when it comes to collision repairs.
How can OEMs and insurers partner to enhance vehicle ownership?
Both manufacturers and insurers can commit themselves to focusing on how they can use their core competencies, not compete with one another, to benefit customers. If we both have the customer’s best interests built into our business, we can work together to improve the customer experience.
Technology is the critical enabler. Using data to match price to risk is a win for everyone, but it requires a rapid, smooth process using modern digital capabilities such as cloud and AI to enable interoperability among multiple applications to make it truly convenient for the customer. As we invest in technologies, we can continue to scale up the offering to the benefit of everyone involved.
How do you expect this model to evolve in the coming years?
We plan to expand the availability of auto insurance for our vehicle owners by reaching into more markets, partnering with more carriers, expanding the product offerings, and increasing the use of data. The goal is to continue to help as many of our vehicle owners as possible over a longer timeline—well past their initial purchase of the vehicle and even past any financing period.
If we can anticipate our customers’ needs at every stage of their ownership experience, not just when they are buying or servicing a vehicle, it can help elevate brand loyalty. That is an important way for us to connect with vehicle owners who will eventually be back in the market to make another purchase in the future.