MyDrive: UBI and the need for context-sensitive measurement
Linden Holliday, CEO of MyDrive Solutions, insists that understanding how each insured driver conforms to safe driving benchmarks is critical if insurance companies are to get the right premiums and minimize risk
Under growing political and public pressure to reduce premiums, the UK car insurance industry is rushing to embrace the new generation of lower cost telematics technologies. The theory that better understanding of driver behaviour should reduce risk, drive down premiums for safer drivers, and even improve the overall quality of driving, makes sense.
But driver behaviour is about far more than excessive braking, over-enthusiastic acceleration and speeding. According to The Royal Society for the Prevention of Accidents (RoSPA), the best drivers will adapt to circumstances and make decisions that are right for the conditions rather than simply obeying fixed rules – behaviour that is reflected in space between cars, consistency of driving and adopting speeds that reflect the immediate conditions. Sadly, the early forays into telematics-based insurance are simply not equipped to measure these critical factors.
The RoSPA is undertaking its own second-by-second monitoring programme to create a benchmark for safe driving, and leading UK insurers are piloting telematics in order to identify good and bad drivers and set appropriate premiums that reflect the risk presented by the individual. As an alternative to the current model—a model that is no longer sustainable due to legislative restrictions over gender and, possibly, age-based premiums—the ability to determine individual risk based on real driver behaviour is compelling.
Current recording techniques only grasp the blunt information tools of harsh braking and acceleration, or excessive speeding. They look at really basic, exceptional behaviours, and place no emphasis on the subtleties of driving, subtleties that taken together allow us to learn a great deal. Equally importantly, they provide no context, such as the traffic situation, nor do they build a profile that reflects the types and times of journeys an individual undertakes or assess the consistency of the driver.
In reality, the current information resources fail to reflect the criteria that are required to determine driver safety. This basic data cannot clearly identify the traits that relate to risk. At best, strong braking and acceleration are a proxy to some of the characteristics. At worst, such measurements can give, on a regular basis, false positive indications of behaviour.
This is a shame because the main benefit of moving away from the basic proxies of age, gender, job description, is to move to direct measurements of driver behaviour. Whilst braking, acceleration and speeding are indeed measurements, they are vague and symptomatic solely of specific, single driver behaviours and not clear indicators of the important underlying causes. The exceptional events recorded merely scratch the surface of a rich and valuable seam of information coming from the driver and, when reported in this way, the intelligence is lost forever.
What is safe driving?
This directly relates to the critically important question of what is a good and safe driver. Ultimately, this is a judgement, but it is the belief of MyDrive that this judgement should be made by a suitably qualified agency, not a commercial business. MyDrive embed RoSPA thinking into their capability, and it is the RoSPA Gold standard that is the benchmark against which all MyDrive driver behaviour profiles are assessed.
If telematics is to deliver real value to the industry in the long term, it is essential to gain real insight into what determines safe driver behaviour, to build a proven model of safe driving and match that model with individual driver performance. According to RoSPA, the safest drivers have a number of clearly defined characteristics and the organisation is currently embarking upon a telematics project to capture the driving behaviour of its own advanced drivers. The second-by-second driver analysis information is being used to create a credible and objective benchmark against which other drivers can be measured. (For more on second-by-second driver analysis, see MyDrive: The One-Second-Data Doctrine.)
This benchmark will encompass the characteristics determined by RoSPA. According to the Society, the safest drivers demonstrate an ability to make decisions that encourage co-operation with others in traffic, rather than conflict. This requires a driver to take responsibility not just for their own actions but for those of others around them. The best drivers will adapt to circumstances and make decisions that are right for the conditions rather than simply obeying fixed rules
The RoSPA also believes that making good decisions requires an ability to focus on relevant information, use it to make good decisions as well as to communicate intentions effectively to other road users. Safe drivers manipulate the space around them to ensure that they can see, can be seen and have escape space available to cope with the mistakes that all drivers inevitably make, including their own.
Selection of speed and driving style are critical but also context sensitive. The speeds chosen by safe drivers will be linked to the immediate conditions and the space available, giving time to plan and anticipate rather than always react to the dynamic environment of the road. All this will manifest itself in driving that is smooth, systematic, consistent, unhurried and co-operative.
If the industry is to really develop premiums that reflect a driver’s behaviour, it is therefore imperative to move beyond the tools currently being used and opt for detailed monitoring of driver behaviour. Companies need to record a raft of information that includes driver consistency, patterns of conduct and the timing of trips. By adding in GPS location data, congestion data and road familiarity to provide context to each driving manoeuvre, the insurer can truly understand driver behaviour and hence attribute appropriate premiums.
For an industry struggling to drive down risk and meet challenging demands for lower premiums, telematics is compelling. Companies that successfully harness new insights to identify good and bad drivers and to price policies according to the risk of an individual have a real chance of gaining significant market share.
However, if the industry persists in its current approach, collecting limited, less relevant data, and failing to analyse it correctly, telematics will fail to fulfil its potential. It’s the perfect example of a little bit of knowledge being a dangerous thing.
The RoSPA is leading the way with the creation of a ‘safe driver’ benchmark. The onus is now on the industry to wake up to the need for second-by-second and context sensitive measurement to attain in depth understanding of behaviour that reflects the key characteristics of the safe driver, one that is actively engaged, avoids danger and is, as a consequence, lower risk.Telematics may be in its infancy, but its potential is huge. The insurance industry therefore has to ensure this potentially vital technology is not heading for a false start.
For more on insurance telematics, see Special report: Insurance telematics.
For exclusive insurance telematics business analysis and insight, read TU’s Smart Vehicle Technology: The Future of Insurance Telematics report.