Connected Car Insurance USA 2016: Day Two Blog

Continued from Day One

With 49 states now hosting at least 10 insurance programmes enabled by some sort of telematics, according to Willis Towers Watson, the competition among insurers is even more intense. Katie DeGraaf, DriveAbility senior consultant for the firm, told conference attendees: “Up until now we have been able to do good enough. Given the rate of change competition and external pressures, I don’t think we can just keep doing good enough.”

There are three ways that insurers can up their game, according to DeGraaf:

Harness data:From telecoms, carmakers, location based services providers and others. Different data sources will provide different insights.

Engage customers: Insurers should create meaningful experiences for consumers. To do this, some are hiring new roles such as chief innovation officer or chief digital officer.

Price accurately: Telematics data can validate existing models, improve them and begin to replace them. In the short term, DeGraaf said, insurers should build on their existing offerings, testing new things and learning from those tests. “Recognise that one shoe does not fit all,” she added.

Mutating insurers

Mariel Devesa, head of innovation for Farmers Insurance, said: “Insurance as we know it will change.” In the interim, there are opportunities for insurers, she said. Perhaps insurers can develop flexible, dynamic coverage; or, they might shift their focus from risk mitigation to the prevention of risk.

A panel of carmakers, an insurer and a tech provider discussed how they were working together to create not only new kinds of insurance but also joint services.

Insurer USAA is working with Ford on schemes to provide a complete experience at the dealer, from choosing a car to financing to buying insurance, so someone could leave the lot with everything in place. Said Tracy Parks, head of connectivity alliance strategy and planning at Ford: “In order for us to present a coherent, coordinated customer experience that leverages everything, we will have to work together to bring forth a combined offering that makes sense to customers.”

Michael J. Carroll, vice-president of sales, connected car for Danlaw. He positioned connected cars as part of intelligent device networking “beyond the dongle”. He noted, “Some value-added services may be more valuable to a consumer than their driving score and a discount. You have to get out of your box a little bit.” He added that insurers wouldn’t be able to eke additional revenue from these; they’d have to partner with other companies.

Distraction, advanced safety and human factors

Many people attribute the increase in traffic fatalities, despite safer cars, to distraction. Yet Bryan Reimer, associate director of the New England University Transportation Center and a research scientist in the MIT AgeLab, said the picture is more complicated. “It’s a comorbidity of factors,” he said. He proposed that safer and more comfortable cars are contributing to driver inattention, because drivers are attempting to find other uses for the attention they used to need to focus on tasks like keeping in the lane.

He also suggested that drivers may unconsciously compensate for the safety features by taking more risks. For example, someone who has automatic emergency braking might drive faster. In other words, he said: “It’s a myth that the more automation we add, the less we need human expertise.”

Data explosion

Certainly, more and more data could drive insurers’ pricing and risk ratings. However, one panel warned, it’s a difficult task to marry data from multiple sources; even ODBII data from different devices is not the same.

Said Sam Madden, a professor at MIT: “The ability to allow consumers to move data from one provider to another is a noble goal we should all strive for. Right now, there are technical barriers to doing this.” One company’s notion of an event may be different from another’s, for example. And even within one company, a change in an algorithm may change. Moreover, it will be extremely difficult to make sure that metadata associated with the initial record travels with it correctly as it’s passed from application to application and vendor to insurer, according to Mac Fraser, CIO of CCC Information Services.

While there have been calls for standardisation, such standardisation could be limiting. For example, it might require focusing on fewer more universal factors such as harsh braking. Said Geoffrey Werner, UBI global product leader of Willis Towers Watson: “That would be an absolute travesty in dumbing down the power of this telematics data to do anything more than give a pricing advantage.”

Another problem with data-driven insurance is that it’s difficult to integrate new data sources with insurers’ existing workflows, according to Marc Fredman, senior vice-president of corporate strategy and development at CCC Information Services. Madden suggested: “Maybe a more reasonable goal is to aim for a credit score-like insurance score – and maybe there would be facilities where customer could get scored and then provide that to an insurance company.”

Progressive’s mobile era

Dave Pratt, general manager of UBI for Progressive, gave an update on his company’s programmes: It reached 2M Snapshot policies this year and currently has 1M data-capture devices installed. The average discount is around 5%.

Pratt also discussed his company’s launch of a mobile app, which is about to go live. Progressive spent three years working on the user experience and validating the data capture. It tested various vendors’ ability to detect, for example, when someone was driving as opposed to riding or walking, against data generated by plugged-in devices. “We found a wide range of performance compared to the OBD device, and a lot of variation among vendors,” he said. “But the contest convinced us that you can get pretty good data out of the phone.”

Conclusion

By the way, we probably should stop saying “UBI”. As insurers expand their view of how to collect and make use of data from telematics devices, they are looking way beyond just the usage of the car. “Telematics-enabled insurance programme” is more accurate but way more clunky. Can someone please come up with something sexier?