Systems open to accepting data from any source hold key to insurers’ future

Usage-based insurance (UBI) appears to have reached a kind of tipping point, at least in the strategies carmakers are adapting to bring the solution into the mainstream.

Both solution providers and insurers are increasingly looking for approaches to make the product more attractive to consumers not lured by its original selling point, lower premiums. The expectation is that by offering new value-added services that will lower costs for insurers and help customers cope with the consequences of an accident, the product will penetrate mainstream market segments more rapidly.

In announcing its global partnership with SAS, a leading provider of business analytics software and services, Octo Telematics provided a concise evaluation of the current status of UBI:  “The global agreement between Octoand SAS aims to accelerate the intake of telematics into mainstream insurance products and create even further value for insurers and consumers at a time when usage-based insurance productsare mature for mass-market adoption.”

Another recent announcement, by insurance telematics provider Scope Technologies, suggests that the technology is advancing in step with these ambitions. In June, Scope said it had developed a new claims management platform that, among other features, would help insurers tackle the persistent and costly problem of whiplash fraud.

Cyril Zeller, vice-president, key accounts at Scope, said the technology was developed by “digging into the databases of hospitals and neck injury specialists to find a contextual correlation of neck injuries we could measure for our crash algorithm”.

The algorithm detects the amount of G-force produced during a crash, the impact zone and the angle of the impact. The severity of the injury can then be determined based on a chart of statistical probability, drawn up from these databases. “These databases track the circumstances of all kinds of [crash] injuries,” Zeller explains. “We first released the data on neck injuries because here we found a clear correlation.”

Whiplash fraud is a big problem in Europe, especially in the UK. The Association of British Insurers said that more than 1,500 whiplash claims are made in the UK every day, costing the insurance industry more than £2Bn a year while adding £90 to the average annual auto insurance premium. According to the Coalition Against Insurance Fraud, Britain suffers twice the European average for whiplash claims, with four of five car accidents in which one driver admits fault generating a claim. In addition, some insurers say that more than half of Britain’s auto injury fraud is committed by organised gangs.

The Scope claims management platform provides a risk ratio for neck injury in every accident, Zeller said. “If out of 10,000 accidents of a certain kind 80% had a neck injury, that’s a strong correlation,” he explained. “If, on the other hand, if the figure is only 3%, that alerts the insurer that claim may be fraudulent.”

The feature saves insurers money not only by alerting them to the possibility of fraud. It also provides an alternate assessment tool for accident reconstruction before an expert is sent to the site of the crash. “Every single claim on which the accident reconstruction report saves a visit on-site saves money and time,” Zeller said. “It also helps provide faster treatment of the claim, and anything that can improve user satisfaction is of great value to the insurer.”

The product can also help save lives, he adds, when the insurer directs its roadside assistance partner to the Scope platform to determine the severity of the accident. “For some programmes, we also have an emergency response system that includes roadside assistance,” Zeller noted.

The search for UBI services that speak to mainstream segments has also inspired carmakers to seek out partners offering solutions that make their own products more attractive, flexible and dynamic. Recently, two such partnerships were announced, the purchase of telematics insurance platform provider DriveFactor by CCC Information Services and Octo’s partnership with SAS.

Claims handling was an important factor in CCC’s decision to purchase DriveFactor. “We saw potential in using telematics data in the claims process,” says Marc Fredman, senior vice-president, strategy and development, at CCC. “But we didn’t see any providers who could take telematics data and integrate it with claims data in a way that wasn’t disruptive and didn’t ask insurers to do new, unfamiliar things with it. But with DriveFactor we found one.”

He goes on to say that, as a result of the partnership, “we are using data from the accident and putting it in the telematics flow, and taking advantage of it with the tools and technology insurers are familiar with. It helps insurers decide how a claim should be handled and routed, if a damaged car should be totalled and how severe the damage is”.

CCC has a patented solutions called Injury Services, a company they purchased in 2012, which offers a number of casualty servicesand “uses physics-based analytics, time-tested crash reconstruction methods and an extensive library of human crash studies to evaluate the magnitude of impacts and the cause and severity of injuries”, Fredman said. “This is a solution that looks at the physics of an accident.”

The Injury Sciences solution has been used for twenty years. Carriers apply it to determine if reported injuries could have been sustained in the type of accident that occurred, he explained. It can also be used to identify hard fraud and the overtreatment of injuries that are possibly caused in an accident.

While this technology is currently used with numerous carriers throughout the US, Fredman says CCC will be integrating it with data coming from DriveFactor in the future. Solutions coming out of this alliance are scheduled to be released in the second half of 2015. Though reluctant to describe them in detail, Fredman said they will concern the use of telematics data for claims in bodily injury and auto damage from accidents.

He maintained that claims-handling is a key service for insurers. “It’s been shown that the smoother and quicker the claims-handling process is, the longer the consumer will stay with the carrier.” CCC currently has products using predictive data for the early routing of claims. “The next generation of tools using telematics will take predictive modelling a step farther”, he said.

For DriveFactor CEO Steve McKay, the alliance with CCC “is a natural extension of our product, one more way to make our data valuable.” It also enables the company to provide its open, Cloud-based telematics platform to other spaces in the UBI ecosystem, such as device, data and service providers.

Both McKay and Fredman say that the platform, which accepts data from any source, including aftermarket, mobile applications and carmaker-embedded devices, will be a vital asset going forward because it offers flexibility to adapt to the changing UBI ecosystem. McKay said their solution will be “the first full-service open platform for insurance telematics”.

“There is a lot of potential for UBI that remains untapped”, McKay maintained. “For certain segments, there’s a lot of work to be done to make it more attractive. The openness of our platform is a key strategy to help insurers future-proof their telematics investments and have the ability to change as the technology changes.”

That flexibility is also essential to CCC and DriveFactor, Fredman said. “We want to maximise our ability to be flexible and not just bet on one suite of services in the belief that we’ve got it exactly right. This is a rapidly evolving and dynamic space and we want to be positioned to take advantage of the changes.”

Responding to change and adding flexibility were also behind Octo’s partnership with SAS, especially concerning the leveraging of big data. “There are two main benefits of our partnership with SAS,” said Octo’s head of product and service management, Daniele Tortora. “It increases our big data capabilities in methodology and analytics, including data enrichment from external data sources. And, since SAS is a global company, it allows us to address different partners, even beyond the insurance market. In addition, many insurers already have been using SAS tools, which will simplify the integration of our solutions.”

He went on to say that Octo is considering offering new solutions via the partnership, for B2B as well as digital solutions for the smartphone. “In the more traditional use, the partnership will focus on providing new scoring algorithms by managing big data,” Tortora said.

In this use case, having the capability to store and analyse huge amounts of data becomes crucial. “We have more than 3.7M active customers around the world,” Tortora noted. “If we analyse a half million devices for 6 months, that means we are looking at more than 2.5Bn behavioural events, such as acceleration and braking, and 5.5Bn miles. This requires a large effort in terms of capability and software. You need a lot of data storage and computing capability.”

According to Tortora, Octo is now able to process and store up to 228,000 data points every minute, with a database capacity of up to 80 terabytes.

Octo is also looking to improve the quality and cost-effectiveness of different data sources. “We believe that all devices are technology enablers,” he said. ”What is really important is the data itself, which needs to be combined and analysed in context, such as weather and traffic conditions. We are making our product more flexible.”

The new data capabilities made possible by the partnership will also enable Octo to work with data from different carmaker platforms. “Carmakers have their own platforms and therefore data are completely different because they have been built for different purposes”, Tortora said. “It is a big challenge to develop a solution that is adaptable across all platforms.”

This solution will be vital for the growth of UBI, he believes. “We think that the relationship between UBI and carmakers will be very interesting in the future.”

In addition, the increased big data capability will enable Octo to provide more detailed scoring and to provide it more quickly to the driver, approaching real-time analytics. This will be crucial in smartphone solutions, especially regarding customer engagement, Tortora predicts. “The user can review his score every day and will have a continuous link with his insurer, who will contact him with new solutions and cross-selling.”

The increased analytics capability provided by SAS will also influence methodology, for example by embedding new and different approaches in Octo algorithms, such as those used in social networks analysis, Tortora explained.

“Some methodologies and approaches used in social networks analysis, such as analysing a community of clients, will be used as a part of the algorithm in our insurance telematics product”, he said. “This could be used in building a scoring algorithm, for example. It’s interesting to test these different approaches and verify their results.”