Making the most of UBI

But the expenses and logistics involved to connect cars from a plethora of brands to an even greater number of insurance companies have often proved daunting.

That’s where Verisk Analytics comes in. Next year the data analytics and risk assessment firm will introduce its innovative Verisk Telematics Data Exchange, a likely game changer for the way drivers, insurance companies, and auto manufacturers interact.

Most insurance companies would rather rely on actual driving data — miles driven, cornering, harsh braking, accelerating, and so forth — than on traditional criteria to assess driver risk and price accordingly. But getting car owners to share their data voluntarily — for example, through small plug-in devices — has proved expensive. Due to logistical obstacles that prevented widespread adoption of UBI technology, participating drivers were often in a position to demand discounts on their insurance.

According to Jim Levendusky, vice president of Telematics at Verisk Insurance Solutions, those obstacles have been a problem that no one has been able to solve until now. In 2013 there were reportedly only 23 million connected cars worldwide. According to Forbes that number will probably surpass 150 million in 2025. The steady advent of the connected car has helped ensure that the technology needed for the implementation of UBIs is in place. Auto manufacturers are now able to receive massive amounts of detailed driver data about their customers — information that’s invaluable for insurers seeking a way to implement innovative UBI initiatives. But how do you get that data to insurance companies?

“If an insurer were to pursue each individual auto manufacturer, the company would have to engage every automaker to negotiate contracts and have their unique IT systems integrate with each other,” Levendusky explains. “There are thousands of property and casualty insurance companies in the United States. The idea of Ford or General Motors, for example, dealing with a thousand insurers just doesn’t make sense.”

So, how would thousands of American insurers communicate with all those carmakers to access that data? The Verisk Telematics Data Exchange helps connect the dots between auto manufacturers and insurance companies. It’s the first-of-its-kind critical data link for connected-car information.

The Telematics Data Exchange is designed to provide a single, efficient access point for driving information by translating connected-car data into an easily usable format for insurers — even if they have their own telematics models. It will also help car manufacturers efficiently use their connected-car data while protecting the privacy of drivers.

“Verisk is uniquely qualified as an aggregator,” Levendusky says. “Verisk began more than 40 years ago as an industry consortium for property and casualty insurance. Today, we’re a global supplier of risk assessment services and decision analytics.” Verisk has amassed more than 17.3 billion records of premium and claims information and has vast industry expertise. The Telematics Data Exchange can even provide readily available UBI models to insurance companies. “It makes sense for us to step in and provide a single point of contact between auto manufacturers and insurers,” Levendusky added.

The data exchange will also give automakers and insurers access to Verisk’s expansive knowledge and experience in dealing with state regulators through its ISO (Insurance Services Office) business. Since 1971, ISO, now a wholly owned subsidiary of Verisk, has been monitoring regulatory standards and insurance laws and making filings with state authorities on behalf of its customers. “Automakers and insurers have to deal with regulatory infrastructure,” Levendusky says. “The good news is that the Verisk Telematics Data Exchange is intended to help solve those problems by and take some of the burden away from insurers and auto manufacturers.”

Let’s not forget about consumers. They will also benefit from Verisk’s data exchange in new and innovative ways. The Telematics Data Exchange will help make it much more convenient for drivers to pay for insurance that’s tailored to their driving skills and car usage. Why pay for a policy that assumes a car is being used daily because of certain demographic statistics (like marital status and credit score) when the customer in question only drives weekends? In this disruptive age, a pay-as-you-go insurance policy can make sense to connected-car drivers who’ve learned to expect tailored services when they shop for clothing, book a flight, or order food online.

The Telematics Data Exchange makes convenient and user-friendly UBIs a reality. Consumers won’t need to handle small plug-in devices as more and more auto manufacturers look to incorporate that technology in their connected cars, and they won’t have to worry about their data. With Verisk’s innovative data link, consumers pay only for their time in a vehicle. Although discounts for opting-in to a UBI might become a thing of the past, paying insurance by the mile or time in the car will be less expensive anyway. The Telematics Data Exchange helps lower the cost of car ownership for consumers, while allowing auto manufacturers and insurance companies to focus on their core business without the distractions of data integration.

According to Levendusky, the Telematics Data Exchange will pave the way for insurers to widely adopt UBI programs. “The technology gives insurers and drivers the kind of flexibility they might not have had before.” Verisk sensibly connects the converging technologies and innovative ambitions of consumers, insurance companies, and auto manufacturers. As Google’s search engine and Apple’s iPhone fundamentally changed the Internet and communication industry, the Verisk Telematics Data Exchange may just change the way insurers interact with carmakers and consumers.

Don’t miss Insurance Telematics USA 2015 this September 2-3.

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