General Motors (NYSE:GM) announced today that it will offer car insurance via its OnStar brand, which will provide customized rates based on the customer's individual driving habits. OnStar is standard on all GM cars sold in North America, giving the company unprecedented insight into customer driving behavior. The offering will digitally track user's driving practices, setting rates based on these and other factors.
The company said it will provide "a secure, fair, personalized, and easy-to-use digital insurance experience for drivers." GM will also offer discounts to OnStar connected-services subscribers. The company will provide proactive recommendations to customers to help promote safer driving habits that, if followed, could ultimately result in lower rates.
GM will launch a pilot program for its employees living in Arizona in the fourth quarter before rolling out its services to the general public in early 2021.
This will mark the automaker's first foray into the insurance market in more than a decade. The company previously offered insurance services via its GMAC financial services subsidiary before selling off the unit during the Great Recession in 2009 to raise much-needed capital.
As newer cars come equipped with increasingly sophisticated onboard computers, automakers are looking to capitalize on the vast amounts of data they collect. Usage-based insurance rates expand beyond traditional good-driver discounts, providing more-precise data about the customer's driving practices.
Companies have taken a number of paths to disrupt the stodgy insurance industry. Lemonade (NYSE:LMND) doesn't offer car insurance, but has taken a tech-driven, customer-centric approach. The company uses artificial intelligence and chatbots to handle many recurring tasks, making the entire process more efficient, and says it delivers an insurance policy in 90 seconds and gets most claims paid in about 3 minutes.