Here is one of the keynote presentations from the hugely successful Insurance Telematics USA 2010. During the presentation, two Vice Presidents from A.T. Kearney answer the following questions: - How will the insurance telematics market evolve in the next 3-5 years? - What are the implications for insurance companies? - How should insurance companies position themselves for success in the face of uncertainty? To view the presentation WITH AUDIO then click here: http://www.telematicsupdate.com/insurance-telematics/presentations.shtml

1. 2010 Insurance TelematicsConference Chicago, September 13-14, 2010

3. Recent engagements in Financial Services:

4. Business Strategy

5. Marketing, Sales and Channel Effectiveness

6. Customer Experience

7. Innovation and Product Development

8. Operational Excellence

9. Enterprise Transformation

10. Technology Strategy

11. Advised companies in the US and EU on telematics, from strategy through pilot and launchMike Hales Partner

12. Key Questions How will the insurance telematics market evolve in the next 3-5 years? What are the implications for insurance companies? How should insurance companies position themselves for success in the face of uncertainty?

14. Small base but rapid growth of UBIActive Safety Potential US market ~55M subscribers From Niche to Mass Market Appeal Based Feedback Customer Value Proposition Based Performance Current US market ~0.5M subscribers Based Usage Based Sources: Berg Insight; Frost & Sullivan; Consumer data from US and EU insurers; Insurance Research Council; A.T. Kearney analysis

16. Growth

18. Accident response

20. Theft prevention

22. Retention

23. New markets and servicesUS focuses on reciprocity and safety, while EU also embraces Claims

24. Growth of usage-based insurance accelerating Delaying Factors Growth Drivers + Consumers Affordability Awareness Acceptance + Privacy – “big brother” + + Technology Cheaper Smaller Embedded Infrastructure + Installation + + + Regulatory Consumer protection Insurance regulations Environmental Safety + + Telematics Ecosystem Operating complexity Supplier ecosystem

25. Embedded device for safety, diagnostics & roadside assistance – extensible for UBI OEMs embedding telematics From premium to mass market vehicles … … From optional to standard feature By 2014, over 20% of US vehicles are likely to have embedded telematics Source: 2009 Townsend report, Department of Transportation, Ward’s, Bureau of Economic Analysis, iSuppli , A.T. Kearney analysis

26. An increasingly robust ecosystem Application & Service Providers Content Providers & Aggregators Access Network Devices Distribution Auto Home Always Connected Consumer Personal Winners and gatekeepers in the new space are yet to be determined

28. Consumer appetite

29. Proven offering

30. Price and value

31. Mass market

32. Adverse selection

33. Switching costs

34. Embedded technology

35. Insurers forced to enter

36. Consumers compelled2014? Today Tipping Point 15+ years ~3-5 years When do you believe the industry will reach a tipping point?

39. Reduced rates for good drivers, but…

40. Potential limits on rate increases for risky drivers

41. Consumer backlash or poor experience impact brand

42. External data ownership reduces the ability to differentiateProfitability Brand Differentiation

43. Suggested strategy to win 1 2 5 3 4 Manage Unique Economics Establish Organizational Focus & Strategy Build Holistic Offering by Target Segment LeverageStrategic Partnerships CreateCompelling Message & Experience

45. Adopt incubator approach to accelerate innovation and contain complexity

47. Target both new customers and existing customer base

48. Determine launch sequence and timing

49. Define the core product & service platform

51. Create simple and sufficient message to enable customers to self-select

52. Understand and manage privacy concerns

53. Exploit telematics to deliver on key customer experience attributes

54. Proactively take advantage of new and more frequent interactions

56. Experience

57. Intellectual Property

58. Vision and Strategy

59. Organizational Focus

60. Speed to Market

61. Risk Management

62. Market Insight

63. Capabilities & IPIP Org Structure Successful Relationship Relationship Governance Performance Management Longer term, need to partner with gatekeepers in the telematics ecosystem

65. Share of customer wallet

66. Retention

67. Customer acquisition costs

68. Product costs

69. Operating costsCosts Revenues ~ Margin: Underwriting revenue offset by Loss Costs Profit per customer + Growth: Customer acquisition + Retention Core growth + Growth: Expanded markets and offerings Unregulated growth

70. Key Messages “Get in the market … and have a longer-term plan”– the market is evolving rapidly, by-standers run the risk of declining profitability and losing market share “Know your customer” – understand how to serve the customer beyond traditional insurance and leverage increased interactions to create value “Enhance your brand” – define your role in the telematics ecosystem, and take steps to differentiate and protect your company “You can’t do it alone” – partnerships are required to get to market quickly, to make multiple bets in the face of uncertainty as well as ensure longer-term success “Make the new economics work” – understand and exploit the economics of telematics to achieve growth while protecting or improving profitability and reduce cost barriers