Data exchanges will benefit users and providers
The development of data exchanges is seen as an essential aspect of getting telematics based insurance products making financial sense for providers. With this in mind, TU-Automotive sought the thoughts of Brandon Johnson CEO of telematics solutions provider Modus.
Q. Will exchanges develop telematics service providers’ (TSPs’) capabilities or will they simply normalise data and facilitate the exchange and what are your thoughts on how their relationship and the industry may change?
“Exchanges will rise from the companies that have the most driving, claims and accident data to work with. The data will need to be from a variety of different customer segments and regions to, ultimately, be a generally accepted data source, much like a FICO credit score. The largest TSPs will be well positioned to become the data exchanges of the future and, I believe, there will be quite a bit of consolidation of TSPs in the next one to three years.
“Companies like LexisNexis and Verisk will be well positioned to play the data exchange role, as well. However, in the near term, they will need to grab enough market share to secure that role. It is a critical time for them. There is also a strong possibility that the data exchanges of the future will be a result of the consolidation of TSPs and existing data companies like LexisNexis and Verisk.”
Q. Can all parties benefit from exchanges or will the system’s monetisation favour some players more than others?
“As with UBI, first-mover insurance carriers will have the greatest advantage and will carry the most cost until we reach scale. Payment for data will include contributing data. Those not contributing data into the exchange will pay a higher cost. As the exchanges reach scale, there will be a lower barrier to entry for UBI programmes resulting in increased revenue opportunities for TSPs.
“End users will benefit from the portability of their driving data and enjoy UBI pricing from point of sale rather than engaging in a cumbersome on-boarding process. While high risk drivers will have increased monetary incentive to change their behaviour, it may mirror bad credit offenders who are simply willing to pay the price.”
Q. What incentives/penalties can be imposed to ensure that all data is free from corruption entering the exchanges?
“Generally accepted standards will be established and data exchange companies will ensure their data meets those standards. Standards will be driven more by a competitive landscape than any sort of ‘Big Brother’ government oversight. Using generally accepted practice for credit scores, there are three main players and that competition keeps them all in check. None want to be viewed as the bureau with mediocre data and that drives their quality. The same type of landscape will emerge with telematics data exchanges.”
Q. Who will have oversight of the exchanges in a way that ensures transparency and engenders trust within all stakeholders?
“Standards will be established and enforced by some type of government body, most likely the in the US by the Federal Trade Commission, yet competition will be the real and inherent enforcement.”
[Ins.Myles.2017.01.04]
