Six things you should know about connected cars

By Miles is a UK Pay-per-mile car insurer. Our monthly rolling contract and real-time itemised billing puts the driver back in control of their car insurance.

1. What is a connected car?

A connected car is a car that is equipped with internet access, allowing the car to share internet connectivity with other devices both inside and outside of the vehicle.

The Internet of Things

Connected cars are one part of the ever growing web of connected devices known as the Internet of Things (IoT). The IoT allows everyday items to have access to the internet so that you have more control over how and where you interact with them. Thanks to the IoT, we can now control and monitor things such as: heating (Nest, Hive), lighting (Hue), fitness (Fitbit), security (MyFox), music (Sonos) and even air quality (Awair).

2. How can cars become connected?

You can either buy a device to connect your car to the internet or you can buy a vehicle that is already connected.

In the UK, Vodafone already offer a kit which when plugged in, can turn your car in to a WiFi hotspot. Vodafone use their 4G network to offer the same sort of connectivity you could get with your mobile phone.

Telematics devices, which look at your car health and performance, are now also using the cellular networks to add connectivity to your car. This connectivity is often "machine to machine" and so doesn't offer the driver direct connectivity to the web. However some telematics providers are also starting to offer a WiFi hotspot too.

Connected Cars

Car manufacturers (OEMs) are investing heavily into connected cars. OEMs understand that a connected car can create a real-time relationship with the driver that allows them to offer a better, broader and safer experience for their customers on an on-going basis.

On 28 April 2015 the European Parliament voted in favour of eCall regulation which requires all new cars be equipped with internet connectivity from April 2018. An eCall-equipped car will automatically contact the nearest emergency centre in case of a collision and tell it the location of the car.

So in essence, all new cars built in the EU from April 2018 will be connected cars.

3. Which car manufacturers are investing the most into connected cars?

Car manufacturers (OEMs) are investing heavily in both connected car and autonomous (self-drive) vehicle technologies. These two disciplines complement each other very well.

Autonomous vehicles are still seen as a thing of the future, where as connected cars are a current reality.

Most innovation is happening in Europe. The EU has led the call for eCall regulation. Large german OEMs like VW/Audi, Mercedes and BMW are forging ahead with the connected car. American and Asian OEMs are catching up quickly with Toyota looking to augment their established electric car positioning.

Connected Cars OEMs

OEMs are hoping connected car technology will help improve vehicle management (both mechanical and logistics), safety, driver assistance (breakdown and traffic) and in-car entertainment.

4. How many connected cars are there?

In 2016, approximately 25 million connected cars were built. This is estimated to grow to around 90 million (75% of all cars built) by 2020. The total number of connected cars on the road by 2020 is expected to be about 250 million.

Connected Cars - Global Shipment Estimates

5. Are drivers concerned about their car becoming connected?

Drivers have have concerns about how the data collected by their connected car is used. Invasion of privacy is the number one concern for drivers.

People's Concerns on Connected Cars

Surveys have found that people are increasing willing to share data as long as they get something in return (for example, a better experience). And data is shared all the time about how people live their lives.

We have got used to our mobile phones sharing our location via Google traffic (to show traffic hotspots), or Strava recording our exercise routines or Netflix using our tv history to recommend new programs to us.

Telematics - Data Sharing

When asked how willing drivers are to share their data with OEMs, around 50% said they were happy if they got something in return, 30% we willing if that data was only used for research and the final 20% didn't want any data shared.

Driver's Willingness to Share Connected Car Data

6. How will connected cars affect my car insurance?

Telematic devices and the connected car open up new car insurance opportunities for drivers.

Advantages of Telematics

Pay-as-you-drive (PAYD) policies use data from the car to measure how it travels, typically so that low mileage drivers can benefit from lower premiums.

Pay-how-you-drive (PHYD) polices use data to measure driver behaviour. This means drivers can benefit from lower premiums if they have good driver habits.

Connected cars will give insurers more metrics about the driver so that they can create a more bespoke insurance tailored to the driver. The cost of the insurance policy will be more representative of the driver and car, rather than just based on old fashioned metrics like where what sort of job they do.

Usage of Connected Cars

Usage based insurance (i.e. a combination of PAYD and PHYD polices) is growing year on year. The US and Italy markets have larger number of drivers who opt for UBI. The size of the market in the UK is growing at about 25% per year.

Driver Appetite for Usage Based Insurance

The main appeal of usage based insurance, is the reduction in insurance premium. Confused.com estimate savings on an average policy is likely to be around 30%. Confused.com believe 50% of drivers say they would use UBI if it could save them more than 20% on their policy premium.

Bonus: Real Data From Connected Cars

By Miles is looking to use data from connected cars to offer cheaper car insurance to lower mileage drivers.

Take a look at the sort of information a telematics device can tell a car insurance company, read 5 things we learned from our pay-per-mile trial.


Sources