—– Original Message —–

From: Salvador Minguijon

To: Salvador Minguijon

Sent: Wednesday, October 25, 2006 1:57 PM

Subject: “Pay As You Drive” Information

Dear gentlemen:

If you are interested in knowing more details about the project of Norwich Union, I recommend you to read the articles of Telematics Update and of Money-Guardian, besides a video of the BBC.

To process this enormous quantity of information it has been subscribed an agreement with Teradata that we suppose that is compatible with the one carried out previously with Intec.

Norwich is trying now to look for partners to throw its project in other countries and this way to recover part of the costs that this development has caused. Zuerich Swiss is the first one that is openly known.

It is not very well-known the fact that Norwich has a policy “Pay as you drive” for fleets. In this case he receives the data directly from the company that managements the information of the fleet. Up to now they have only homologated Cybit’s Fleestar-online, and now it has just been homologated Masternaut, a French origin company.

It is very interesting to observe the political repercussions the activities od Norwich are having. We can see examples in England (link 1,2,3,4,5) but also in France, where they begin to see it as something unavoidable and that it will be necessary to coordinate with the law. And also in U.S.A. and Canada.

In Germany, after a couple of months of certain passivity, we detect activity again. T-System and Swiss Re try to impress the possible clients of its projects to add synergies in a very difficult market.

Although in Germany we know that the most probable thing is that the market will be dominated by the company that makes the earlest, firmest and chancy bet. Something similar Norwich made in England, whose project was practically profiled when it became public.

Concerning Germany, it is something more than a year ago when Christina Groetzner (IBM Automotive Business Solutions) prepared a presentation for the insurance companies on the project “Pay as you drive”.

It was a magnificent work which had a great repercussion in the sector.

Now this presentation also acquires a historical value: In that moment it existed the convincing that this project would be dominated at world level by the consortium of companies Norwich Union, Progressive and IBM, that would develop the product and would give the technology to all the insurance companies that would like to market it. And when the objective was nearly reached, a crash of managerial cultures, made crumble an entire perfectly defined and planned strategy.

As always, I remind you that I have upgraded my database “Pay As You Drive Directory”

Lastly, I want to invite you to that read and to participate with your comments in a Blog about strategic considerations of the projects “Pay as you Drive”. I have the intention of adding articles related with this, because I have lately received several consultations of companies that are interested in this topic, but that have lots of doubts to make it. I hope this can be helpfull for them.

Yours sincerely.

                                                                                Salvador Minguijon

The future of the systems “Pay as you drive”

 

 

 

The derived problems of the congestion of the traffic, the contamination, the cost and financing of the transport infrastructures, the appearance of electric and mixed vehicles, with the necessary compensation of taxes on fuels with other alternatives, the necessity of looking for more efficient solutions for the control of the parking in the cities, etc., This takes us, in Europe, to the adoption of systems as the type “Road Pricing” that will be fully implanted in a term of 15 or 20 years.

It will be a defined system by the European Union that will also be adopted by all the neighbour countries.

 

 

In United States, Canada and other developed or developing countries a similar evolution is foreseen.

 

 

The solution is also defined quite clearly. A computer equipped with a geographical positioning system and communications capacity in the vehicle, will be manager the information and connect with an external net by means of communications channel.

 

 

This system will give support for many entertainment, informative, maintenance of the vehicle, etc. applications.

 

 

The governments will impose the necessity of the system to be opened to the competition, but due to the complexity of the project and to the necessity of security in the management of the information and its enormous volume, the market will be definitively dominated at world level by IBM, Siemens, Deutsche Telecom and Mitsubishi.

 

 

There will be plenty of companies that will access to a place in this market offering applications and specialized services.

 

 

The variable cost, that is linked to the use of the vehicle, will overcome the fixed costs well over. The cost of the fuel, even in spite of being very high, doesn´t represent neither the fourth part of the variable costs of the vehicle, among whose now are taxes, tolls, insurance, parking, maintenance, etc.

 

 

One of the services to incorporate in this system is the insurance of the automobile of the type “Pay As You Drive” that will also be constituted as the main communication channel between the insurance company and their client.

 

We can imagine circulating for the highway Cm 110 when a pleasant voice reminds us that the back central passenger must have to fasten up the seat belt again and that we are coming closer to the population of Estriegana that is celebrating his festival and that it is advisable to reduce the speed to 80 km/hour.

 

 

 

The business of the insurance companies in the sector of the automobile will have change so radically that the insurance companies will have had to segregate their activities in this sector in independent organizations, almost always with participations of such “strange” companies as energy, technological, services of Internet, communications etc. companies.

 

 

In their marketing campaigns it will be quite normal to them to show off of the drop rate of their clients’ accidentability while their main activity will centre in detecting and correcting the risk behaviour rules of its clients. All this without their feel of being neither pressed neither controlled.

 

 

The core of its business will be the analysis of the enormous information that will receive from their clients to analyze its correlation with the risk and the definition of political of communication with its clients, carried out by experts in Psychology and Traffic Security so that they are able to correct their behaviour rules.

 

The conventional insurance policies have practically disappeared, from the appearance of the first projects “Pay as you drive” which has left an escalade of prices in the conventional insurance as any profitable segment was immediately grateful and specifically attacked with products specially designed for them.

Strategic considerations about “Pay as you drive”

As soon as Norwich Union announced the “Pay as you drive” Project commercial launching, a certain situation of “anxiety” has taken place in the sector of the automobile insurance and several companies have consulted me to see how they could focus a project of this type and their doubts and concerns.

Because of it, I have decided to prepare some articles with a strategic focus, in where I hope the insurance companies can find some guide to face this phenomenon.

It is necessary to clarify that there are not magic formulas, we know very well what the present situation is and we have a quite concret idea of how the future will be in the next 15 or 20 years. Among these two points there is a sufficiently big difference so as to prevent that in this trip there will be many companies that will beneficied and others harmed.

It is not only to react on time, of having been able to analyze the problem meticulously and of having been positioned strategically, but besides of having had the luck of having made decisions whose suitability is contrasted in the time. It is necessary to keep in mind that all decision implies a risk of making a mistake and that its success will also depend on the decisions that our competitors and collaborators will make in the course of the time.

In first place I will explain which is the future to where we seem to go. Somebody said that the history is curved while the forecasts are lineal, that is to say that our forecasts are only the tangent in a certain moment, and that we aren´t able to prevent the way changes.This is worth fully for this case, with the only exception that our forecast is located in a period of 10-20 years where it is difficult that a radical change of direction takes place.

Later on, I will explain which it is the current situation of the projects “Pay as you drive” who are the actors which are their motivations, which are their plans and their expectations, with which capacities they count, etc.

Lastly we will try to imagine which events or scenarios we could find in the course of next 15 years.