Usage-dependent and driver-based.

  • 23. March 2016
  • Connectivity
  • Illustration: Realgestalt
  • Text: Ernesto Singer

Telematic control units – transmitter in vehicle reduces running costs.

Leasing by the minute – a concept that customers of the car2go car-sharing solution are already familiar with. Rather than paying a flat rate they pay for the time they actually use the car. So how would it be if the leasing instalments and the insurance for a new car could also be calculated based on usage and behaviour? In other words, you would only pay for the miles you actually drive, and based on your personal driving style. As telematics get ever more sophisticated this will soon become a possibility for Mercedes-Benz customers. Daimler Financial Services has initiated two innovative pilot projects that focus on customer benefit in the form of reduced vehicle running costs. The Dynamic Lease option relates to the financing of the car, while Pay How You Drive (PHYD) affects the insurance cost.

In both cases the driver determines his own rates: a real first! Never before has it been possible to exert such a degree of individual influence. “Thanks to these additional features, Mercedes-Benz customers using Dynamic Lease will be paying according to their actual mileage; no more, no less,” according to Felix von Düsterlho, Head of Product and Innovation Management at Daimler Financial Services. “Similarly, PHYD insurance premiums, or rather the associated rebates, are linked to the driving style, with defensive driving being rewarded. In order to achieve the optimum price for the customer we are able to utilise real-time telematic data from the vehicle over the term of the policy.” No other vehicle manufacturer is currently offering such innovative services.

Dynamic Lease: Automated process provides transparency

In the Dynamic Lease contract the customer agrees to having the vehicle’s mileage recorded on a regular basis – over a precisely defined period. This information, normally transmitted once a month via the telematic control unit (TCU), is sufficient to calculate a variable rate based on actual usage. The monthly base rate which constitutes the second element of the Dynamic Lease agreement always remains constant.

' no more and no less '

Felix von Düsterlho, Director of Product and Innovation Management, Daimler Financial Services

Fair pricing concept and data protection for private and business customers

Personal circumstances change, and business driving requirements are subject to natural fluctuations – this is where the flexible rate as a fair pricing concept comes into its own. “The basic principle,” explains von Düsterlho, “is that you pay less for periods with reduced mileage than for periods in which there is increased driving activity.” This cost-saving concept benefits both business users and private customers, for example if they end up driving less than originally anticipated. But at the same time this concept also avoids unexpectedly high final payments, because the flexible rate is already adjusted automatically over the course of the leasing period.

Anonymised data is an essential requirement for the Dynamic Lease agreement, to comply with all pertinent data protection requirements and ensure smooth operation. Data is collected solely for invoicing purposes. Dynamic Lease will be launched in the summer of 2016, initially in Italy and Sweden. After a successful start-up period in the two pilot markets, accompanied by sustained customer acceptance, other countries are set to follow gradually.

Pay How You Drive: Driving style affects insurance premium

With Pay How You Drive (PHYD), another innovative product offered by Daimler Financial Services, the focus is not on the mileage as such but rather on the individual driving style. How you drive has a direct impact on the price of your insurance premium.

Rebate: Calculated annually

The process is incredibly simple: once the insurance policy is in place the customer activates the PHYD service for the vehicle through the Mercedes me portal. From this point on, the telematic control unit installed in the vehicle – roughly similar in size to a DVD case – begins to collect data. For example, the TCU detects and records the time and GPS location data every two minutes while the vehicle is being driven.

Eco scores reflect driving style

In addition, there are eco scores, based on acceleration, deceleration and overall smoothness of driving. “The information is collated at Daimler Financial Services, from where it is sent in anonymised form to an external scoring service provider,” explains Cora Wickert, an expert on insurance innovations at Daimler Financial Services.

The scoring service calculates average scores for the driving style on a scale from zero to one hundred. The process is similar to a fitness app that determines the current physical condition based on the data collected by a fitness bracelet. In the next step the driving style information is passed on to the insurer, who uses a table to determine the amount of the annual rebate, based on the average score. Cora Wickert sums up the main points: “Drivers can only benefit from PHYD, as the premium will not be increased.” Potential savings from annual premium rebates are estimated at between five and fifteen per cent.

Data accessible at any time via Mercedes me The most important point is that drivers can access their data online at any time via Mercedes me – and then decide whether to stick to their current driving style or alter their behaviour based on specific advice. They can receive immediate feedback on their last twenty journeys, including specific tips, while keeping an eye on their current overall score at the same time.

Similar to a fitness app

PHYD system available with new E-Class

In the second half of 2016, the first European countries – Germany, France and Belgium – will see the introduction of the new Mercedes-Benz E-Class featuring the PHYD system. This makes Mercedes-Benz the first automotive manufacturer to offer its customers such a customisable option, in collaboration with its partners. Other model series are set to follow gradually, in time allowing all Mercedes driver to benefit from individual rebates on their PHYD insurance premiums.

As a package: Dynamic Lease and Pay How You Drive

Both these innovative products have great potential, whether taken individually or as a package, as Felix von Düsterlho explains: “The customer decides which service to use. It will of course be possible to combine the leasing agreement and the insurance.”

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