Monetising auto software best- the vehicle OEMs or insurers for embedded and subscription services?, Mike Daly

This is not a new topic; I was writing about it back in 2016 when Ford, GM and Tesla were all planning to offer insurance. Insurance is a complex and highly regulated business though and only Tesla continues to offer insurance but with limited market inpact currently.

Electric vehicles and emerging autonomous ones are where the real-time data is generated which is one reason OEMs target subscription services.

“ Beyond improving basic functions of the vehicle, carmakers have been drawn to the potential of software to deliver more revenues through collection of user data and offerings of subscription services that come with a monthly fee for insurance, servicing and repairs. The monetisation aspect is particularly appealing for companies grappling with higher development costs and lower margins for EVs.”

Kana Inagaki in London, and David Keohane in the Financial Times 23rd Sep 2024
It is tough though. At the start of 2025, France’s Renault cancelled plans to list shares in its new EV and software business amid slowing growth in battery-run car sales worldwide. But the Ampere unit remains on track to launch its first software-defined vehicle — which its chief executive Luca de Meo has described as “a mobile phone on wheels” — in 2026. It also aims to generate 40 per cent of the profit generated by the car over its life cycle from software by 2030, compared with the current 10%

OEMs might well be the original data generators but households rarely own just one car. Even if they offer insurance and repairs for the vehicle they manufacture how can they do the same for competitor's vehicles?

Motor insurers and MGAs can plan to deliver the entire value-chain of insurance from underwriting through policy personalization to claims handling and repair networks. But what about that real-time data? They do leverage smartphones to measure driving data and road-traffic accidents and can link these to claims teams for eFNOL, claims processing and looking after customers who need emergency support.

But, real-time data from the software stack in the vehicle is essential for risk prevention, driver education, and widening the services offered.

Carriers that partner with vehicle OEMs can leverage the sweet spot of data plus risk prevention and mitigation. That requires a good strategy, long-term planning and the ability to deploy ecosystems that deliver benefit to both customers, vehicle OEMs, insurers and supply chain participants.

Partners that can manage not just data from the vehicle OEMs but also repair networks and supply chains, emergency services, credit-hire, personal injury assessment… the list goes on.

There will be tension between those auto OEMs that plan to generate 40% of revenues from software and insurers that already stream insurance revenues to their bottom lines. Viable partnerships would create a competitive advantage and profit to both.

Insurers live by leveraging data though connecting the data dots across all the parts of the insurance value chain is a challenge for most. The FT article shows how legacy auto manufacturers struggle to cope with being software companies.

Can insurers help them out of this conundrum? For there is another aspect to this as Bryan Falchuk wrote in an article for Sapiens ‘What does digital transformation really mean?’

“A less stark example is thinking about how your existing Commercial Lines products, like BOP, E&O or GL, apply to businesses that are fully-digital. Here, the transformation is less about how you as an insurer operate digitally, and more about how you serve those who operate digitally. This becomes more extreme if you think about something like autonomous, shared vehicles. While it may still be decades away, one day, people may not hold personal auto policies with that exposure moving into the commercial, product liability space. If you are heavily engaged in personal auto insurance and are not thinking about transforming your product offering, your position in the market will be threatened.”

Finally, a word on ecosystems, data fluidity, and adaptability.

Carriers, like many enterprises, are typically constrained in legacy technology stacks that make it harder to innovate, bring new products to market fast enough, and adapt to customers' and business partners' changing needs and behaviours. The costs of version upgrades are rooted in a oast world of on-prem CRM and core systems.

The advent of modern cloud-native point solutions for, say, counter fraud, digital payments, claims management, underwriting et al, make it more practical to create ecosystems. But, the time has come when core systems providers must deliver MACH-architected core platforms (definition in Further Reading below) as the foundation of ecosystems that deliver competitive advantage. Vendors like EIS, Genasys, ICE, Instanda, Ignite, and Majesco have started that trend which will gather momentum over the next five years.

Rory Yates offered a valuable view on this aspect: -

“ We've had SIM's in cars and decent telematics for a long while so just having more data and connectivity isn't the solution for insurers. Instead, insurers need business models that know how to turn data into meaningful insights and act on those insights in propositions and experiences. To do that you need to be built around the customer, data-fluidity, and intelligence; and to have massive amounts of adaptability and extensibility. Foundations need to be reset in insurance. You can't build skyscrapers from bungalow foundations. This is just another example of untapped new value potential that has been with us for some time.”

Microservices architected means that you can build a software product as a set of independent components — microservices — where each component operates on its own and interacts with others through APIs. As a result, teams can deploy, change, and improve separate software components without disrupting the rest of the system.

API-first architectures are more flexible allowing teams to choose the most appropriate frontend technology to solve priority business problems. Developers can unify logic across touchpoints and avoid duplication of development work, as well as eliminate channel silos.

APIs allow for fast communication between components, meaning that businesses can reduce the time to implement new touchpoints and accelerate speed-to-market processes.

Cloud-native platforms use the public, private, and hybrid cloud as part of a cloud migration strategy to develop scalable and dynamic data solutions. Insurers will be more resilient to performance issues that often bug on-premises systems.

Headless - far from being clueless! Insurers that employ headless architecture don’t have a default frontend system that defines how content is presented to end users. You will be able to deliver personalised products and services to your target audience using any channels, devices, and platforms.

Insurers Can Parlay Technology into a Competitive Edge- but too many don't!

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How technology in claims processing is changing consumer choices in insurance

Surveys highlight data maturity holding back AI deployment ambitions

Underwriting trailblazers outgun mainstream insurers.

CoreTech, ClaimTech, and Ecosystems for innovative insurers

Digital services generate only about $300mn, or 3 per cent, of automaker revenues globally, according to Accenture. However, the consultancy projects that this could expand to $3.5tn by 2040, accounting for nearly 40 per cent of the revenue generated by the automotive industry.

https://www.ft.com/content/7e5677b8-87fa-41fa-8648-9009ac7f14fc