Viewpoint: Black box versus smartphone in insurance telematics
Greg McGarry, managing director, DriveProfiler (Ireland), explores the filpside of using smartphones as driver-monitoring devices in insurance telematics.
At first glance, insurers considering their options for the launch of a UBI-based motor insurance product might consider the bring-your-own-device (BYOD) model as the ultimate solution.
It mitigates capital expenditure and deployment headaches.
However, BYOD is not as simple as it seems. Smartphone hardware is excellent, but, absent a mature utilization and deployment model, the excellence of the hardware may be undermined. For example, if the data gleaned from a UBI solution is inaccurate, the insurer is at risk of over-pricing the good risks, under-pricing the bad and ultimately damaging its brand.
Those interested in procuring a solution that will stand the test of time must, therefore, have a thorough understanding of the challenges involved.
Smartphone: Present & charged?
How can the insurer be certain that the insured person will bring their smartphone on all journeys?
If GPS data is to be used, the battery won’t last long – GPS receivers are hungry for power. Therefore, the insured person will have to ensure their phone is charging at all times while driving.
Finally, boy racers, who have for years invested heavily in various systems to defeat police speed-metering equipment, will be sure to ‘forget’ their phone when engaging in dangerous driving practice.
Accuracy of data
Accelerometer data is essential for accurate measurement of driver behavior. If an accelerometer-containing smartphone is not physically tethered to the vehicle, then it will be impossible to gather accurate data from it. Any movement at all by the smartphone within the vehicle’s interior will make the data unusable.
The only solution to this is to use a tether or bracket to secure the phone to the vehicle. If this is to be provided by a UBI vendor, then that raises three issues:
First, the Accelerometer will need time to calibrate itself before the data may be relied upon – this can take more than ten minutes of driving for each and every journey. Second, in order to provide accurate journey ‘Start & Finish’ data, the tether would need to be wired into the vehicle. Third, there is little point in BYOD if a tether must be purchased and deployed by the insurer anyway.
This can be managed, of course, but it does complicate what might have seemed like a far simpler solution originally.
Of critical importance to UBI is security of personal data. With BYOD, the increasing prevalence of second-hand phones creates risk, particularly in the youth segment, where the behavior of a previous insured person might contaminate the data of a new one.
With a black-box solution, the vehicle is tracked. With a smartphone solution, the insured person is tracked at all times. There are major data protection risks surrounding this proposition.
Also, when is the data collected by the smartphone to be uploaded to the insurer? Is this initiated by the insured person, or is it automatic? If automatic, it requires an opt-in by the insured person. This is likely to prove highly unpopular with consumers. If manual, then what sanctions shall the insurer impose if the insured person fails to do so?
Who shall own the data collected by a given smartphone?
If the insured person changes insurance vendors, can the new insurer collect the data already contained on the phone?
Will there be sufficient safeguards on the smartphone to prevent proprietary, data-collection technology developed by insurer A from being reverse-engineered by insurer B?
Even device manufacturers have found it impossible to prevent their device’s security being circumvented by hackers, e.g. iPhone jailbreaking. It is highly probable that a popular UBI app would be singled out for hacking, to allow users to deliver an A+ result, regardless of their true driving style.
Elimination of noise
How can we differentiate the insured person from when they are a passenger instead of a driver? In a taxi or travelling with friends? Is the insured person going to be prompted continuously by their UBI app to clarify whether they’re driving?
If GPS speed is to be used to calculate ‘Trip Start’ by speed, how is ‘Trip End’ calculated? By the vehicle stopping? How shall traffic lights, traffic jams be dealt with?
In summary, for a valid UBI solution, it is not enough to just have a device within the four walls of a vehicle. UBI hardware must work in spite of the consumer, not depend on his/her interaction.
Greg McGarry is managing director of DriveProfiler (Ireland).
For all the latest telematics trends, check out Insurance Telematics USA 2013 on Sept. 4-5 in Chicago, Telematics Brazil & LATAM 2013 on Sept. 11-12 in Sao Paulo, Brazil, Telematics Japan/China 2013 on Oct. 8-10 in Tokyo, Telematics Munich 2013 on Nov. 11-12 in Munich, Germany, Telematics for Fleet Management USA 2013 on Nov. 20-21 in Atlanta, Georgia, and Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco.
For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.