Data, Data Everywhere as UBI Becomes Ubiquitous
Day one round-up of Insurance Telematics USA 2014.
One image stood out on the first day of the Telematics Insurance 2014 show in Chicago: a UBI heatmap of the United States. Robin Harbage, a director at Towers Watson, presented a map of the United States showing the relative penetration of usage-based insurance trials. As of 2010, most states on the map were a cool blue, showing a lack of activity. Year over year, various states turned pale yellow as activity heated up. But most marked was the change from January 2014 to the present, when the map turned bright yellow to orange. UBI is here to stay – in fact, the majority of the audience polled predicted that UBI would account for 10 percent of policies in the next few years.
It's not just industry insiders who think this. A Towers Watson consumer survey found that 52 percent of people in the United States are definitely interested in UBI, while 79 percent would be open to it.
Drivers' fears of being tracked seem to have abated as information about potential discounts trickles into the market. In fact, UBI could offer a pricing approach that actually makes better sense to consumers, according to Eric Nordman, director of regulatory services and CIPR for the National Association of Insurance Commissioners. "We get lots of complaints about using the credit rating for the insurance score," he said, "because the connection between credit and driving doesn't make sense to consumers. Usage-based insurance offers a much more intuitive approach."
The dongle dilemma
The question of the best device to collect data is no closer to being answered, although an increasing number of companies are offering smartphone-based solutions, talking up their ease of deployment and cheaper cost.
Several vendors insisted that telematics data from smartphones is inferior to that obtained from devices plugged into the OBD II port: There's more noise, events may be misinterpreted and it's possible that someone who's a vehicle passenger or riding a bike might have the trip counted toward his driving record.
Some companies are working to solve these issues. Tata Consultancy Services is working on analytics that will create a driving profile, so that a UBI system will be able to recognize when someone is actually behind the wheel. Allstate Insurance Co. took a much simpler approach for the mobile version of its DriveWise product: Users can simply delete a trip if they think it was scored incorrectly.
Insurers should carefully plan access to data as they launch multiple products or use more than one UBI device,according to Vincent Pavero, director of products and innovation for IMETRIK, an M2M solutions provider. He recommended providing different interfaces to the same data to serve multiple users. For example, an agent dashboard would focus on orders and support, while a manager dashboard would feature risk analysis and claims reports, as well as marketing information. The driver dashboard would let the driver see driving stats and scores, whether a discount is in the offing and, perhaps, community features that would let him or her connect with family, friends or even other drivers who are similar.
In fact, that driver dashboard is likely the key to UBI insurers turning a profit. The Towers Watson service found that consumers' main concerns are worry that premiums will increase, worry about sharing data and worry that claims will be invalidated. All of these fears can be eased by providing a driver dashboard that gives clear and timely information, according to Jonathan Hewett, CMO of Octo Telematics, a service provider for UBI.
Importance of third-party information
Blending in data from a variety of sources could improve risk profiling. In the simplest example, by including traffic data, an insurer could tell that a driver braked hard because there was a sudden slowdown, not because he was inattentive.
Steven Fernandes, innovation manager and assistant director of product development for The Hartford, said, "If you build your solution to have access to these third-party data sets, like the geography of the road and traffic patterns, it gives you much more valuable data on driver behavior. And we can use this instead of proxies to decide how we want to price this driver."
Who owns the data?
Regulators are concerned about consumer privacy and the ownership of their data. In fact, some state regulators may be more concerned about this than their citizens. Allen Greenberg, senior policy analyst for the Federal Highway Administration, US Department of Transportation, told the audience that he believes UBI can encourage people to drive more safely, but only if drivers understand how their driving behavior impacts their rates. Therefore, USDOT wants to fund two projects that will demonstrate the creation of a competitive insurance marketplace using driver data. The idea is that different companies would have shared access to actuarial results, accepting the data from a shared platform.
If that came to pass, there would be thorny questions about who owns the data, said Catherine McCullough, executive director of the Intelligent Car Coalition. She pointed out that each state has its own set of rules and regulators, while the federal government might also want a say. She asked, "Who will be in charge?"
While consumer fears may have eased, Gail Gottehrer, a partner in the law firm of Axinn, Veltrop & Harkrider LLP, predicted that a class-action lawsuit involving telematics data is almost inevitable. There's no case law on this yet, she said, so any such suit would come down to an argument about the contract between insurer and insured. She said, "The clearer we can be about what rights the driver is giving up in return for the agreement, the more enforceable it will be."
Insurers would love it if automakers would just provide them with the data they need, but it's not so easy. David Chronowski, product manager for Ford Connected Services Solutions, pointed out that every manufacturer has implemented auto diagnostics differently. While there might someday be an SAE standard for vehicle data, he said, "If we're trying to build something for the insurance companies, who defines what that is? I don't see that kind of cohesion any time soon."
And Robert Gruszczynski, OBD communication expert with Volkswagen Group of America, was vehemently negative about insurers' dongle initiatives. He said, "The OBD II port has never been, nor is it now, nor will it ever be a telematics thing." It was designed only to help automakers meet emission standards, and he warned that there's evidence that its use in insurance telematics may be leading to issues with batteries and connections.
Big, fat disruptors
Looming over every discussion about consumer-centric applications are, inevitably, Google and Apple. A panel handicapped the ability of these CE giants to play a role in insurance telematics.
"They are expert at having consumers feel comfortable handing over their data. They're genius at getting people to give them enormous amounts of personal information and doing with it pretty much what they will," said the Intelligent Car Coalition's McCullough. If insurers want to get gain the same kind of access to drivers' personal data, she said, they'll have to learn to relate to customers the same way.
That means value-added services, something that many speakers referenced as the next step in insurance telematics. Most are focusing on apps or portals that provide feedback on driving behavior, with the goal of getting people to drive better and thereby save insurers money on claims.
Sandeep Puri, who handles business integration, sales and strategy for Deloitte Consulting, posited that Apple's Siri could be used to provide real-time feedback to drivers, such as warning them of a traffic jam ahead or reminding them to keep a lighter foot on the gas pedal.
Even incorporating social media into the driver's interface could add value, according to Vincent Pavero, director of products and innovation for IMETRIK. For example, aggregating tweets about the presence of black ice on a route someone is about to take could help him plan his route or encourage him to take extra care.
These value-adds could include setting up geofencing for a teenage driver or using the automotive diagnostics information to alert the car's owner that it needs servicing. Adding in third-party data like weather information would let the insurer alert the driver of bad weather and suggest an alternate route.
These value-added driver services also create extra value for the insurer, noted Marc Natrillo, director of product development for The Hartford. In addition to avoidance of losses, he said that insurers could learn more about a driver by seeing how she reacted to such messages.
What's certain is that the insurance industry will evolve in ways we can't yet imagine. The key to surfing the waves of change, said Ryan Morrison, CEO of True Mileage, which offers a UBI solution, is to focus on "not what makes sense for insurance companies but what drivers really want."