From Actuarial Tables to Telematics: Can Traditional Insurers Compete with Data-Driven Car Manufacturers?

Estimated Reading Time: 5 minutes

Introduction

The most disruptive competitor in auto insurance isn’t a startup - it’s the car itself. The auto insurance industry is undergoing a seismic transformation. As vehicles become smarter, more connected, and increasingly software-defined, car manufacturers are leveraging their built-in technological infrastructure to enter the insurance space directly challenging traditional insurers that have long dominated this market. But this isn’t merely a case of new competition. It marks a fundamental redefinition of auto insurance in the era of real-time data, embedded analytics, and AI-driven risk assessment.

With billions in premium dollars and the customer relationship itself at stake, both automakers and insurers are racing to define the future of mobility risk each bringing distinct strengths to the battle.

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The Manufacturer's Edge: Embedded Technology

Direct Access to Vehicle Data

Car manufacturers now possess what insurers have historically sought: uninterrupted, comprehensive access to vehicle and driving data. Today’s vehicles are essentially rolling data centers, continuously generating high-frequency telemetry on driver behaviors, vehicle condition, environmental context, and system performance.

While insurers have attempted to collect such data through aftermarket telematics devices or smartphone apps, their reach is limited by consumer opt-in. In contrast, manufacturers can access robust datasets from every connected vehicle in their fleet creating a scale and granularity of data that insurers simply can’t match without direct integration.

Tesla, for example, gathers data from a sophisticated suite of sensors eight cameras, twelve ultrasonic sensors, and radar systems to build detailed risk profiles. This level of integration offers manufacturers a significant advantage in underwriting precision and pricing sophistication.

System-Level Control and Safety Design

Beyond data collection, manufacturers design and control the vehicle systems that directly influence road safety. As developers of advanced driver-assistance systems (ADAS), they hold unique insight into how these technologies work, their failure points, and their real-world performance.

When Volvo launched its City Safety automatic braking system, it could immediately estimate the risk reduction impact based on internal simulations and field tests. Traditional insurers, on the other hand, must wait for actuarial credibility to emerge from loss data a delay that impedes rapid pricing adjustments.

According to the Highway Loss Data Institute, ADAS-equipped vehicles reduce bodily injury claims by 27% and property damage claims by 19%, giving Original Equipment Manufacturers (OEMs) a clearer path to risk mitigation than insurers waiting on lagged claims data² .

The Traditional Insurer's Counterbalance: Scale and Expertise

Actuarial Depth and Risk Modelling Heritage

Despite being outgunned technologically, traditional insurers bring decades of actuarial expertise and refined statistical modelling. Companies like State Farm, Progressive, and Allstate have built vast historical datasets and nuanced risk models that incorporate not just driving patterns, but also behavioural psychology, geographic risk, and demographic nuances.

They’ve successfully adapted through multiple safety innovations such as ABS and electronic stability control by incrementally incorporating new risk factors into premium algorithms. This institutional knowledge gives insurers a contextual advantage in interpreting loss patterns over time.

Distribution, Customer Relationships, and Regulatory Know-How

Insurers also benefit from deeply embedded infrastructure: claims handling systems, agent networks, and multistate regulatory expertise. Building these from scratch is a steep hill for manufacturers to climb.

Customer inertia further reinforces their position. Many policyholders maintain long-term relationships with insurers, often bundling auto, home, and life policies for convenience and discounts. This entrenched customer base provides insurers a degree of stickiness that new entrants can’t easily replicate.

Emerging Battlegrounds: The Fight for Market Redefinition

Usage-Based Insurance (UBI) at Scale

One of the most dynamic fronts is usage-based insurance where premiums reflect actual driving behavior rather than proxies like age or zip code. While insurers pioneered this space through programs like Progressive’s Snapshot or Allstate’s Drive wise, OEMs can now offer UBI at scale, without aftermarket devices.

While insurers like Progressive have onboarded over 4 million users to their UBI programs, this still represents less than 10% of their policyholder base, highlighting how OEMs’ built-in tech could instantly scale behavior-based pricing.

GM’s OnStar Insurance taps into native telematics to deliver continuous behavioral pricing updates offering a more responsive and personalized product than traditional UBI models that rely on trial periods. Manufacturers may soon shift the pricing paradigm from reactive to real-time.

From Risk Transfer to Risk Prevention

Both manufacturers and insurers are increasingly emphasizing accident prevention. For OEMs, the focus is on equipping vehicles with increasingly autonomous, fail-safe systems. Mercedes-Benz and Volvo have even announced “zero-fatality” visions a bold reframing of auto safety from probabilistic to preventative.

Insurers spend about 11% of each premium dollar on claims handling and another 23% on underwriting and marketing - areas where OEMs could slash costs using embedded technology, manufacturer-direct channels, and lower commission structures.

Insurers, for their part, are starting to evolve from passive payers of claims to active risk managers. Programs like Liberty Mutual’s Right Track provide feedback loops to nudge safer driving. This convergence in prevention strategies will likely blur traditional roles.

Autonomous Vehicles and Liability Realignment

Autonomy changes everything. As control transitions from driver to machine, liability will shift from individuals to manufacturers and software providers. Insurance will no longer be solely a consumer product it will increasingly resemble commercial liability coverage.

Tesla’s own insurance offering is built with this shift in mind. Its Full Self-Driving system is expected to reduce human risk while increasing exposure on the manufacturer side. This inversion challenges traditional insurers to rethink their role or risk irrelevance in the autonomous era. Tesla reports offering premiums up to 30% lower than traditional carriers, dynamically priced through a real-time 'Safety Score' that adjusts daily based on actual driving behavior¹ .

Electric Vehicles: A New Risk Profile

Electric vehicles introduce further complications. While regulators encourage EV adoption through preferential pricing, practical concerns persist. Lithium-ion batteries are expensive to replace, sensitive to water damage, and pose a higher fire risk. Additionally, parts are often imported, making repairs more vulnerable to supply chain shocks and tariffs. Insurers must recalibrate underwriting assumptions to reflect this evolving risk landscape.

Strategic Alliances: Bridging the Divide

Recognizing their complementary strengths, manufacturers and insurers are increasingly joining forces. Toyota, through its Insurance Management Solutions platform, partners with established insurers to offer connected coverage. Similarly, BMW and Swiss Re collaborate to fuse vehicle telemetry with traditional underwriting.

These alliances point to a hybrid future where manufacturers provide the tech stack and data, while insurers contribute regulatory fluency, claims infrastructure, and actuarial modelling.

Conclusion

With over $300 billion in U.S. auto insurance premiums up for grabs each year, the stakes couldn’t be higher. Whoever controls the data - and adapts fastest - will define the industry’s future. The auto insurance market is rapidly shifting from a stable, legacy-driven system to a dynamic, data-infused ecosystem. This isn't a zero-sum game. Instead of one side winning outright, the future will likely belong to collaborative models that combine the precision of embedded technology with the analytical depth and operational maturity of traditional insurance.

For actuaries and insurance professionals, this transformation offers a fascinating opportunity and challenge. Success will depend on the ability to harness real-time data, rethink pricing fundamentals, and adapt to a world where vehicles are not just transportation tools but intelligent, connected platforms.

In this new era, the ultimate winners will be those who can deliver lower risk, greater personalization, and seamless customer experiences all at scale.

1  https://www.tesla.com/support/insurance

2  https://www.milliman.com/en/insight/car-manufacturers-are-challenging-traditional-auto-insurers-who-will-win-the-tech-race?path=car-manufacturers-are-challenging-traditional-auto-insurers-who-will-win-the-tech-race