Cutting in the middleman for data handling

While the promise of usage-based insurance (UBI) is great, penetration in the United States is not so great. At Insurance Telematics USA 2015 conference in Chicago, David Lukens, director of telematics for LexisNexis, said consumer demand and awareness are flat.

There remain significant barriers for insurers:

·         Dongle-type devices are expensive to distribute and not necessarily easy for drivers to install;

·         Smartphone apps may depend on drivers to turn them on in order to gather data;

·         Insurers struggle to understand and make use of driving data.

But as carmakers roll out vehicles with persistent connections, there’s a new paradigm: instead of each insurer having to provide a device or an app to gather UBI data, each can use data from the car’s embedded systems. Siphoning up data directly from the vehicle takes care of those first two issues. But the availability of OEM-embedded systems for transmitting driving data complicates the data analytics issue even more.

Some insurers already are working directly with carmakers. However, as James Levendusky, vice-president of telematics at Verisk Insurance Solutions, points out: “There’s a many-to-many problem.” With dozens of automakers selling hundreds of models and hundreds of insurers wanting access to the data, it’s a business development problem from hell – and a data-standardisation problem from Hades.

Verisk and ATG Risk Solutions aim to solve this many-to-many problem with two different approaches. The Verisk Telematics Data Exchange aims to provide the data link between auto manufacturers and consumers who drive connected cars.

ATG’s The Clearinghouse will produce standardised driving scores, similar to credit scores that can be used by insurers. It’s beginning with commercial fleet data and aims to move into personal lines later.

Verisk is forging partnerships directly with carmakers and has announced General Motors (GM) as its initial partner. The model for these partnerships and how the data is used will likely vary among manufacturers, according to Levendusky. But they would first need to invite each new car buyer to opt in to sharing data from their vehicles. This could be done as part of the initial sales process, via email or other customer contact after the purchase, or in the context of a factory-run safe driver programme. From the other side, if a consumer came to an insurer with a request for a quote, and that consumer had not joined the carmaker’s safe driver programme, the insurance agent could let him or her know of potential savings for opting in.

“It is very explicit opt-in information. Do you want to share this with insurers for the opportunity to save on insurance?” Levendusky says. “And the consumer can opt out later.”

Verisk will allow insurers to use data from the Telematics Data Exchange to inform their own ratings, and it also is creating a template model that can be used by insurers, filing it with state insurance commissions throughout the US.

Portable scores

The three outputs of ATG’s The Clearinghouse are a standardised, complete data set that’s normalised by class and territory; a safe driving score; and a way for drivers to view their data.

The driving score will give a true assessment of driving risk, according to Chris Carver, president of ATG Risk Solutions, by taking into account a lot more than hard braking, speeding etc. “The driving score is about the individual drivers and the choices they make in daily driving,” he says. That includes time of day driven, road conditions and the safety features of the car being driven.

To that end, ATG formed a partnership with INRIX to provide data on road conditions that could be used to help inform driving scores.

Carver says: “We want to create a model where everyone can get their score and designate an insurer to receive it.” The driving score would be similar to a FICO score and used in a similar fashion by insurers.

Consumer transparency

Both ATG and Verisk plan to provide consumers with access to their driving scores. How this might be done is still to be determined. Levendusky says the challenge lies in making the information meaningful to consumers. “If data from the carmaker is coming in on a trip-by-trip basis, and it’s event based, what does it mean to give a consumer a report? There’s no direct analogue to this.”

ATG also plans to let drivers know what data is being shared, and how the insurance company may rate them before they agree to share their data with insurers. “It needs to be something easy to understand and for the agent to explain,” he says.

Carver doesn’t see this as winner-take-all. He says: “Consumers are best served if there are multiple clearinghouses.” He adds that the industry should keep in mind the lessons learned in the early days of credit scoring: “We need to make sure we start out the journey with the initial assumption that consumers own their data, and they can decide which of those bureaus to use, which score they like. And the insurer can make the decision about using one or all [of the clearinghouses].”

Leave a comment

Your email address will not be published. Required fields are marked *