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Novatel Device Targets Usage-Based Insurance

San Diego-based Novatel Wireless Inc. is out to help drivers ease into a new world of automobile insurance.

The San Diego-based company builds vehicle tracking hardware and software that lets consumers take advantage of special insurance products, including something called “usage-based insurance.”

Novatel Wireless (Nasdaq: NVTL) said earlier this year that it will work in concert with Himex — a software company in Scottsdale, Ariz., that serves the insurance industry — to offer usage-based insurance and “smart fleet” products. Financial terms of the deal were not disclosed.

Novatel’s contribution to the partnership is a piece of vehicle tracking hardware called the MT 3060, a box slightly smaller than a pack of cigarettes that plugs into a vehicle’s on-board diagnostics port. The MT 3060 has several ways to record how a person is driving. Using a three-axis accelerometer and satellite location technology, the device can detect speed, location, hard braking, cornering and impacts. The gadget also acts as a wireless modem, sending data to cell towers using a variety of 2G and 3G wireless standards.

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Usage-based insurance is a burgeoning market that is growing by 50 percent yearly in North America, said Alex Hauk, senior director of telematics with electronics maker Telit Wireless Solutions in Orange County’s Foothill Ranch. Vendors are “only scratching the surface” of the North American market, he said, estimating that 1 to 2 percent of drivers have it.

Meanwhile, London-based Ptolemus Consulting Group recently predicted that it will reach 100 million vehicles globally by 2020. Insurance products carry the names “pay as you drive” or “pay how you drive.” Ptolemus expects the usage-based insurance market to grow dramatically in Asia.

Novatel also makes hardware and software for fleet management. The business recently told investors that it is targeting at least 30 percent growth in the machine-to-machine communications space and may end 2014 with a $60 million annual run rate.

Other Players in the Game

San Diego is somewhat of a hub for fleet-monitoring hardware and software; it’s home to Lytx Inc. — formerly DriveCam — and SmartDrive Systems Inc.

Some companies seek to provide similar services via smartphone apps rather than hardware, such as Zenhavior Inc., a San Diego based software startup, which has a goal of sending data to insurance carriers, fleet monitoring firms and parents.

Beyond San Diego, there are other Southern California electronics companies in this space.

Telit Communications PLC (AIM: TCM), a British company with operations in Orange County, makes cellular radio and satellite-location components. Telit ships several hundred thousand units a year, Hauk said. Michigan-based Danlaw Inc. integrates Telit electronics into a device similar to Novatel’s.

CalAmp Corp. (Nasdaq: CAMP) in Ventura County also makes devices similar to Novatel’s and sells to Himex.

Privately held Himex, which has an office in London, offers its products to major insurance carriers. Last year, Himex announced a five-year deal in which Sprint Corp. (NYSE: S) will provide airtime for connected cars.

Taking a Snapshot

The highest-profile example of user-based insurance is probably Ohio-based Progressive Corp.’s Snapshot — available in 45 states, though not California. Snapshot monitors driver behavior after drivers install a tracking device in their vehicles. After 30 days, Progressive (NYSE: PGR) determines whether a driver’s behavior merits a discount and, if so, how much; it currently advertises discounts up to 25 percent. The company said it bases discounts on three factors: the client’s mileage, hard braking and the time of day the client drives — driving between midnight and 4 a.m. may impact the rate.

Progressive did not return a call for comment, and it’s unclear who makes the vehicle monitoring hardware the company distributes to its policyholders. Novatel said it does not supply the company. Progressive introduced its first in-car device in 2008. In March, Progressive said it had collected 10 billion miles, or 110 terabytes, of driving data.

Novatel has been in the news recently because of a brewing proxy fight. A group of shareholders filed paperwork with securities regulators March 20, saying it wanted to change the makeup of Novatel Wireless’ board.

The company reported a net loss of $43.4 million, or $1.28 per share, on revenue of $335 million in 2013. One year earlier, it reported a net loss of $89.3 million, or $2.72 per share, on revenue of $344 million.

Novatel Wireless’ other products include the MiFi intelligent mobile hot spot and modules for machine-to-machine communication.

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