Telematics data fuelling car insurance shift
Mo Data stashed this in Big Data in Insurance
The car insurance industry is undergoing a vast change, in which policies can be priced according to real, measured driving abilities. In-car telematics, to track driving each journey, are enabling this.
Traditionally, car insurance has been set according to fixed data, such as the age and sex of the driver, whether they have made any claims before, and details about the vehicle and where it is commonly parked. All of this information remains relevant to insurers, but it does not present a detailed picture.At Towers Watson, we help insurance companies assess risk, and technology is vital in enabling them to know the accident exposure of each driver, and to price low within their risk framework. This offers obvious benefits for safe drivers, in terms of cost.
Telematics, meaning the link between communications and IT, allows us to put small devices in cars, logging how a person is driving. More modern vehicles increasingly include this technology automatically, but it can easily be added to older models. Nearly all top US companies are taking an interest, and there are UK businesses such as Insure the Box (which has sold over 200,000 telematics based policies, and now sells 8,000 more each month). Other pioneering UK firms include Co-Op, Young Marmalade, InGenie and Carrot.While the technology has great potential, some systems used elsewhere have used simplistic measurement. They only look at how fast a driver drives, and how suddenly they brake or corner, and do not take account of road conditions or road speed.We believe in much more advanced technology that takes account of a vast amount of factors. Our telematics looks at the weather conditions including if the road is wet, difficult road junctions and the amount of traffic around. This conducts a thorough examination of real driving behaviour within the exact environment the driver is in.
The information we collect is vast. We store around one million rows of data per customer per year, from data that is collected every second by our systems. We then clean the data for scoring and analysis.This clean data itself is not enough; the key is how we analyse it. We draw all of the information into our intelligence systems, which reach conclusions on how responsibly a driver is acting. Over the course of a period of time we can gain a clear picture on their level of risk.We can also monitor where accident hotspots are, and see how often any particular driver goes through these areas. An awareness of risk and changing behaviour to respond pro-actively to an accident hotspot can markedly reduce their risk level in this environment.We can also improve how we assess theft risk based on the location of the car. While insurers without telematics have to judge risk based on where a car is normally parked at home, we can monitor every place a car is left in, checking for areas with high theft levels.
Car insurance customers are often frustrated at the prices they face, particularly when they are safe drivers. We find increasingly that many people are keen to have their driving measured to see a fair risk assessment. Insurers often allow trials of devices so that people can see if it works for them.Young people are among the worst affected by prices for standard insurance and telematics offers a way to tackle this problem. We can engage young people in other ways to take up the technology: using 'gamification', presenting a driving safety score at the end of the journey, challenges young people to drive better than their friends or family.
A number of insurance companies offer mobile apps that measure driving ability - by simply switching on the tracking app before travelling. But currently they tend to record very basic braking and acceleration data only, and only when the driver chooses to use the app.The next phase for mobile technology is to pair phones properly to cars, adding much more sophisticated driving assessment technology. A good example of an environment allowing this is at Ford, which has opened up its app store to encourage developers to create systems. Ford has sold four million connected cars in the US alone.Many people are working in this area to integrate smartphone systems to cars. This will bring consumer benefits including the ability to customise the apps within their car, emergency and breakdown call and connected vehicle diagnostics.Now that the data is available the challenge for the future is how we improve analytics to turn this data into information. The ways that we spot patterns in driving and in dangers, and the ways we pick up key metrics, will affect how we judge risk. Analytics technology continues to improve, and risk management has a strong future.