The connected Sean Carey, president, SCG Management Consultants Four years ago I presented at IBIS in Barcelona on a topic titled

Connected Car Connected Claim

It’s fair to say I was ‘out on a limb’, a little bit ‘out there’

Today the OEM and claims industry is consumed with talk about… Connected & Connected Claims

IBIS predictions • The connected car will change the claims and repair landscape forever • The component parts are there…But no one has put them together • New entrants will change the landscape • Claims still remains the red headed stepchild of the connected car • The new entrants are with us….Verisk, Apple, Google, OCTO • The pace of change has increased….technology compresses time • It’s not full autonomous it’s the journey…ADAS, mobility, car share/hail….rapid change

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission Why would the United Arab Emirates be interested…

It’s a global phenomenon The connected car landscape The connected car is connected to everything

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission The connected car market Significant and rapid growth – 45% CAGR Active User Connected Car

135

95

70 MM Units MM Units 50 85 33 55 28 21 25 30 15 5 7 2014 2015 2016 2017 2018 2019 2020

BI Intelligence, 2015.

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission Technology compresses time

TechnologyTechnology CompressesCompresses TimeTime

20172017 20202020 Advanced Driver Assistance Systems (ADAS)

• Adaptive (ACC) • Driver drowsiness detection • Rain sensor • Adaptive high beam • Driver Monitoring System • Surround View system • Glare-free high beam and pixel light • Electric vehicle warning sounds used • Traffic sign recognition in hybrids and plug-in electric vehicles • Adaptive light control: swivelling curve • Turning assistant lights • Emergency driver assistant • Vehicular communication systems • Automatic parking • Forward Collision Warning • Wrong-way warning • Automotive navigation system with • Intersection assistant typically GPS and TMC for providing up-to- date traffic information. • Hill descent control • Automotive • Intelligent speed adaptation or intelligent speed advice (ISA) • • Lane departure warning system • Collision avoidance system (Precrash system) • Lane change assistance • Crosswind stabilization • • Cruise control • Pedestrian protection system

What do the academics think? Accident rate impact

29% Decline by 2020

80% Decline by 2040 Accident rate impact

2.5X Increase

29% Increase The connected car

Focused on safety, user-experience and data

Source: KMPG Self Driving Cars – Automobile Insurance in the Era of Autonomous Vehicles

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission The connected car

Source: KMPG Self Driving Cars – Automobile Insurance in the Era of Autonomous Vehicles The early buds of May Toyota launches a new, US-based company combining and insurance

Telematics Open UBI, Other Driving Data Exchange

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission Effects on workflow… It’s all about the consumer Market – prevailing conditions

 The claims/collision market is highly fragmented and somewhat dysfunctional  The insurers dominate the landscape & The MSO segment has grown to become a significant barometer of the industry  These dominant entities are forging ‘relationships’ that further accelerates the consolidation dynamic  The independent repair community is adrift & the Consumer is getting lost in all of this  Vehicle technology requires different repair methods and procedures creating a technical tsunami & there is a technology tsunami following closely behind  The OEMs are responding to market forces (its now about brand reputation)  Telematics and the connected car will change the market forever

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission So what if? What if the car made the claim?

Scheduling DATA CENTERS Emergency Dispatch

Insurance Constant Updated Performance Claim Communications based Assignments

Damage Analytics Scorecards Assessment & Parts List

Source images for illustrative purposes only SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission Connected car gives OEMs FNOL

Telematics-based Predictive FNOL estimate directly to shop Claims Efficiency – Improved Cycle time Reduced Cost – Happier Customers

Current Insurer DRP Process X X X X Accident Call Shop Est. Est. Repair Repair Car CSI Insurer Located Sched. Compl. Sched. Compl. Delivered

Quality- OEM parts - $140MM Certified shops Retention - ~$60 Bil focused, dealer per point, retention retention & resale , supported marketing opportunities opportunities realized – unperformed shop using (1% total loss) - ~$1bil 1% new car sale aftercare @ OEM retention ~$5bil dealership Procedures, (Referrals)

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission It’s not just about parts… It’s much bigger

• Consumer Awareness - The market has been losing sight of the consumer and yet the consumer is the lifeblood for OEM’s. 1% of market is worth $5 billion

• Consumer Sentiment – OEM’s can no longer put their brand at risk to shabby claims and repair experiences…what if it goes viral…and it does go viral

• Retention – Getting vehicle brand owners back into vehicle brand is critical, consumers change brands 40% of the time if their car is totaled. This is a multi billion dollar opportunity (based on US news and BB&T data). In addition, Chrysler senior execs say if there is an issue with an accident repair, 60% of those vehicles will be sold or traded within a year. 63% will be replaced with a different brand

• Telematics – Will change the workflow and power status of this industry forever the CONNECTED CAR has already started the journey

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission OEMs return to the market A Whole new World Parts Programs With the old battle lines OEM’s will bring more blurred the OEM’s from a effective parts programs position of necessity and to market such as MPL desire create new sun setting the parts paradigms in the space battle and challenging the where anything is Insurer dominance possible OEMs’ Industry Support All Assets Deployed Market OEM’s will provide much New stakeholders see needed industry support bigger picture and deploy Return in terms of technical, all the OEM Assets to technology and resource secure the future of the business Consumer Networks OEM Stakeholders OEM Networks emerge that compete with As brand reputation is at Insurers for customer risk the OEM stakeholders Partnerships mind share as the OEM’s become Parts group & target and focus on Sales/Brand group The OEM’s establish partnerships with industry constituents consumer

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission Why would the United Arab Emirates be interested?

It’s a global phenomenon You can’t compare markets

Too diverse to Too varied in their standardize stages of development and infrastructure

But will not take 30 years. Certain markets will simply

leapfrog SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission You have to follow the car… excuse the pun

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission

OEM Advanced ADAS Autonomous Fully Materials Market Trial Autonomous X X X X

X X X 2021

X Waymo X

All the major X X X 2021

X X X X OEMs are X X Waymo 2020

X 2022 deep into X X X X development X MIT/Stanford 2020

X X 2018 and testing X Stanford

X X X X

X X 2017 2022

X X X X

X X

Trucks will lead the way The human cost of vehicle transport today is not sustainable Fuel Economy 10%+ 94% of crashes = Human Error Driver fatigue 1.25 Million RTA deaths annually Driver Resources Insurance costs are set to explode Reduced Accidents ~45% Yet Insurance models are set to More efficient payloads change beyond recognition The Environment can’t sustain the Legislation will be complex but expedited smog Autonomous/connected or Complex but inevitable otherwise the road ahead is very Governments supportive different Being fast tracked Early adopters will benefit greatly Car share and car hail will grow rapidly

Socio economic demands a better system By 2020 we will have entered a new Socio Economic Cycle We’ll shift from ‘what’s in it for me’ to ‘what’s in it for us’ More social conscience More environmental concern Greater value on well being over wealth Campus transport not far behind

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission No matter what… the road ahead is changing So how do you prepare?

Trust me, insurers are preparing for this future landscape and have OEMs are at the specialist teams working forefront of creating hard to figure it out this future and it’s making it’s way into the claims/repair segment Repairers should be planning for a future whereby there are less repairs, coming from a different source, requiring higher and different skill levels If you’re not preparing for and using different a different supply chain procedures, equipment and model… you should be. technology than today. How close are you to the vehicle?

SCG Management Consultants LLC – Private & Confidential – Not for Re-Distribution without Permission

Thank you