Insurance telematics and data standards
Susan Kuchinskas checks in with the Association for Cooperative Operations Research and Development (ACORD) to find out how standards for driving information and its transmission could create an aftermarket for usage-based insurance data
ACORD is a non-profit standards organization that facilitates the creation of standards for data exchanged for the insurance industry and financial services, such as life insurance and annuity policies. The organization aims to create such standards for data collected by telematics devices.
In the short term, standard ways to collect and transmit usage-based insurance (UBI) data would facilitate the burgeoning consumer insurance telematics market.
"This data is highly desirable," says Marcia Berner, director of implementation services for ACORD. From the insurance perspective alone, she says, it could be immediately used for risk management, claims validation or creating underwriting guidelines. (For more on UBI, see Industry insight: Insurance telematics.)
Data that makes sense
James Bielak, program manager, property and casualty, for ACORD,says that one of the fundamental issues the working group faces is the divergence in the telematics data provided by different providers. Some companies may only report when a vehicle's ignition is turned on; another may be able to give accelerometer information; and a third might offer many more data points. Then, the group will have to find common ground—a consensus on what should be standardized that everyone can live with.
That doesn't mean that the data to be standardized will be limited to the lowest common denominator of what insurers can provide. The group doesn't want to force companies to track and/or report more than they want to. Instead, Bielak says, the standard format will be, "’If you've got it, put it here; if you don't, don't.’ But every transaction will be in the same spot, so if you are the consumer of the data, you can consume it."
Another issue is how far this standard should reach. Tim Dodge, a member of the ACORD working group, says, "A lot of people feel that how insurance companies use the data is out of scope." Among questions the group is pondering are definitions for transactions types; specifications for data for those transactions; how it gets delivered by the provider to the insurance company; and how insurers can get historical records from other providers.
"These are all questions we'll be wrestling with for a long time to come," says Dodge, director of research and media relations for the Independent Insurance Agents & Brokers of New York, a not-for-profit trade association representing independent agents and brokers in New York State. (For more on data, see Telematics and the value of data, Telematics and UBI: The data challenges, Telematics and probe data: The revenue opportunities and Telematics and UBI: The regulatory opportunities.)
Access to data
Working group participants emphasize that development of insurance telematics standards is in its very early stage. There are many decisions still to be made, according to Dodge.
For example, could an insurer access data in order to underwrite a policy from a consumer with which it doesn't have any relationship? How will telematics devices be delivered to consumers? And, for his organization in particular, what role, if any, would an independent agent or broker play in insurance telematics?
Most auto insurance quoting in the United States is done automatically by computer, Dodge explains. The agent works off a standard application with all information reported by the consumer. While independent agents likely would not see a consumer's telematics data, Dodge says, "They would have to see the results of the data, for example, if somebody's price changed because of their driving habits. We don't know what kind of report the agent would get."
Like many other sectors, the insurance industry has begun to use data analytics to gain competitive advantage, according to a recent survey undertaken by ACORD. The survey found that insurers' analytics activities are moving beyond risk to customers, business operations and finance/investments. The survey found that analytics provides a competitive advantage by helping insurers understand the current market and future trends.
Data analytics and competitive advantage
Approximately one-third of insurers surveyed are using predictive analytics and predictive models very actively, although traditional business intelligence is still the primary focus. Insurers also said that the number one issue in harnessing analytics is data quality and consistency, something that these proposed standards clearly could address.
Lloyd Chumbley, ACORD vice president of standards, reports that 49 percent of companies surveyed thought that data analytics would help them in areas of cross-selling and upselling, for example, figuring out which auto insurance customers would be most likely to buy a life insurance policy as well.
Insurance data standards could provide value beyond insurance ratings and claims adjusting. Right now, insurance telematics is hot, so that's the focus. But while the standardized telematics data will be put into a property casualty XML standard, that data and structure should be insertable into other standards as well, Bielak says.
Eventually, these data streams could be used for what ACORD has started to call "reality-mining," according to Chumbley. "The idea of reality mining is that I can take a very diverse set of information coming from a number of sources and begin to draw conclusions about activities or habits or risks associated with that."
Data sources could include social networks like Google + or Facebook, as well as terrestrial data networks and traffic information sources. Chumbley says, "It's impossible to build a reality view of a corporation or catastrophic risk without having the ability to pull that information from a multitude of sources. You'll never get there without the standard we're talking about. This is not just about telematics, but about what role does telematics play in this bigger issue of reality mining?"
In one scenario, an insurer, via an insurance telematics device, might know that an individual drives a certain route to work every day. Its analytics system could combine that with data on the number of accidents on a particular curve, integrate that with weather information and, if it's sleeting, send a text to the driver saying, ‘You might want to avoid Dead Man's Curve today.’
"This is within the realm of possibility if insurance companies have this data at their disposal," Bielak says.
To make these possibilities reality, Chumbley adds, "Standards is not just about having the right format. It's about getting good data in the right format, and certainly standards affect the bottom line there."
Susan Kuchinskas is a regular contributor to TU.
For more on data standards and UBI, see Industry insight: Insurance telematics.
For the latest on UBI, check out Insurance Telematics Europe 2013 on May 8-9 in London.
Coming up: V2X for Auto Safety and Mobility Europe 2013 on February 20-21 in Frankfurt, Telematics for Fleet Management Europe 2013 on March 19-20 in Amsterdam, Telematics India and South Asia 2013 on April 16-17 in India, Telematics Russia 2013 on May 14-15 in Moscow, Telematics Detroit 2013 on June 5-6 and Content & Apps for Automotive Europe 2013 on June 17-21.
For exclusive telematics business analysis and insight, check out TU’s reports: In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.