GM to Sell Car Insurance, Using Data on Your Driving to Set Prices

General Motors Co. is launching a car-insurance business based on the idea its vehicles can remotely track drivers’ behavior and set insurance rates accordingly.

Source: WSJ | Published on November 18, 2020

driver data sharing

The Detroit-based auto maker will offer insurance plans branded under its OnStar connected-car service, which comes installed on all GM vehicles in North America, the company said Wednesday. Customers who sign up agree to have their driving habits tracked, and those who obey the speed limit, avoid sudden stops and practice other good-driving behavior will be rewarded with cheaper rates, GM said.

For much of its history, GM offered insurance to drivers, ending the business when it unloaded its GMAC financial-services arm in stages to raise cash around the time of its 2009 bankruptcy.

As more new cars are sold with built-in internet connections, car companies are branching into services that aim to capitalize on the growing reams of data generated by a vehicle’s onboard computers and sensors. They are using it for everything from flagging possible mechanical trouble to allowing drivers to order their morning coffee from the vehicle’s multimedia touch screen.

“Who knows more about your vehicle than the people who manufactured it?” said Andrew Rose, president of GM’s newly formed OnStar Insurance Services.

Still, the efforts have been slow to catch on, in part because some of those same services—from navigation to parking—are easily available on drivers’ smartphones, analysts say. GM believes the data it can collect directly from its vehicles will deliver more-precise information than insurance companies can now access.

GM will begin a pilot this week for its own employees in Arizona and plans to offer it nationwide later in 2021, Mr. Rose said. The company will partner with a subsidiary of American Family Insurance to underwrite the policies.

So-called usage-based insurance policies have emerged as one of the more promising uses for connected-car data, analysts say. Insurance companies for years have been offering drivers discounts for good driving, relying on portable devices or smartphone apps to keep tabs on the car’s movements.

Some auto makers provide driving data to insurance companies to help connect their owners to better insurance rates, though few have gone a step further to offer their own plans. Tesla Inc. uses data from its cars to offer insurance to customers. Ford Motor Co. last month said it would give vehicle owners access to cheaper insurance by beaming data from the car to a data exchange used by many carriers to crunch rates.

The number of auto-insurance policies in North America that use digitally-logged data from the car is expected to grow to nearly 50 million in 2023, from about 10.6 million at the end of 2018, according to Berg Insight, a Sweden-based research firm.

GM in recent years has been exploring a way to return to the insurance business by using data from its customers’ vehicles, Mr. Rose said.

To start, the company will set rates much like a typical insurer, relying on traditional factors such as ZIP Code or the amount of driving the policyholder does, Mr. Rose said. Eventually, GM will more heavily weigh driving behavior and other variables in determining rates. Eventually, it could even calculate the amount of times safety features such as emergency braking are deployed, he said.

Another example: GM could track whether tires are inflated properly, which improves stopping distance and reduces the risk of crashes, Mr. Rose said.

Running an insurance division should help GM prepare for a day when it may offer a commercial driverless-car service, Mr. Rose said. Future autonomous robot taxis have the potential to upend the auto-insurance market by eliminating human-caused crashes, though auto makers may need to insure their cars, he said.

Car companies are gravitating to services that rely on specific information from the vehicle that third-party app developers aren’t able to easily replicate, says Brian Rhodes, a research and analysis manager for connected cars at IHS Markit.

“The auto maker has more data at its fingertips that can tie into a unique score and provide more value for insurance purposes,” Mr. Rhodes said.