Why Data-Driven Mobility Could be a Power for Good

Motor Insurers’ Bureau (MIB) chief executive Dominic Clayden claims the data-driven world of mobility can be a real power for good.

He explained at an Association of British Insurers’ (ABI) event that the developments in the insurance industry are now all underpinned by data – including connected and autonomous vehicles. In Clayden’s view, insurance needs to be “absolutely alive” to the opportunities that are created by a “data-driven world of mobility.”

Jonathan Fong, policy adviser for general insurance, at the ABI, says vehicles are becoming increasingly sophisticated and interconnected.” New cars are now fitted with various types of advanced driver-assistance systems (ADAS). Many of them are also benefiting from having blind spot monitoring and automatic emergency braking (AEB). These technologies are making vehicles safer. Yet, they are also making them more difficult and expensive to repair. Consequently, claims costs are driven upwards.

He explains: “In fact, the average cost of claims paid by insurers increased from £2,618 ($3,564) in 2015 to £3,983 ($5,423) in 2020 (N.B. this figure is an average for the first three quarters of 2020, taken from the most recent data at the time of writing in December 2020). The proprietary nature of some of these systems also means that repairs may have to be done by dealer networks as opposed to independent technicians, which further contributes to rising costs of repair.”

Expanding network of connectivity

Change is also being driven by what he calls an ‘expanding network of connectivity’. For example, drivers can use their Bluetooth functionality on their smartphones or tablets to not only connect to their vehicles to play music or to gain access to infotainment but to also send data back to vehicle manufacturers. Subsequently, the risk landscape is changing because of the threat of cyber-attacks. Each connection exposes a different cyber-security challenge and risk.

With regards to autonomous vehicle insurance trends, he comments: “For autonomous vehicles, insurers are still monitoring the development of the technology. In our view, neither the technology nor the supporting infrastructure is in place to allow for the adoption of fully autonomous vehicles at this time. We have set out our safety concerns relating to a premature legalization of autonomous vehicles through the [UK] government’s recent call for evidence on automated lane keeping systems (ALKS).”

Safe automation

To date the ABI believes that ALKS only meets two of the “twelve principles of safe automation”. For this reason, the association believes that the current crop of vehicles should be considered as being assisted rather than as being fully autonomous.  “We continue to work closely with all stakeholders to ensure that a proper regulatory framework is in place for when autonomous vehicles are eventually made available”, he adds.

He then goes on to talk about which developments within the insurance industry are underpinned by data, and about how data is going to be used to create connected and autonomous vehicle insurance policies – commenting that data has always had a vital role to play within the insurance industry, particularly with the rise of the Internet of Things. The advent of 5G will also have a significant impact, leading to increased data volumes.

Fong adds that the “advances in computational power, the decreasing costs of storage, and the amount and quality of data being produced is greatly increasing.” With this comes what he describes as being “richer and denser data”, which helps to “back evidence-based, data-driven decisions and creates opportunities for other efficiencies”. Nothing is without risk.

Pricing risk, better claims handling

So, while technology has an impact on every aspect of the insurance business, bringing with it opportunities, it also creates insurance risks. However, with better quality data, insurance companies can use it, he explains, to more accurately price risk and to better handle claims. Technology is also being used to improving the streamlining of client interactions, or to offer new insurance products.

He explains: “One example of this is a telematics policy. While far from standard, these ‘black box’ devices fitted into cars can monitor driver habits and feed this data back to the insurance company. The company can then adjust premiums to more accurately price risk and offer feedback to the customer to help improve driving.”

Cyber-risk and data privacy

The downside is the cyber-risk factor and data privacy is also a major concern, particularly because there is a need to achieve and maintain regulatory compliance. Data protection is particularly important and compliance often need to be localized to meet the different laws and regulations of a particular region or country.

Fong adds that these concerns: “…will be especially relevant to autonomous vehicles, which are inherently data-driven devices. Moving forward, in what manner do we regulate how these AVs use data to make decisions, how do we store the immense amount of data these vehicles produce, and what do these data-driven decisions mean for fault and liability? These questions will underpin how the insurance industry will conduct underwriting in the future.”

Data: power for good

In conclusion Fong agrees with Clayden’s view that data-driven mobility could be a power for good. That’s because he claims that data is at the core of many of the technologies that are making vehicles safer. He thinks, with the ongoing development of autonomous vehicles, data could “play a role in social equality, providing a viable transportation option for individuals who do not, or cannot drive”.

“Moving forward, data will continue to drive several trends within mobility including the multi-modal transport framework underlying mobility as a service. For the insurance industry, data is helping companies make more accurate decisions, thereby offering increased transparency for customers. It is also central to many of the new insurance products that are offered.”

He, nevertheless, thinks it’s important to remember that data is just data. In other words, it’s neither inherently good nor bad. It can, however, be misused or misinterpreted. This can lead to poor decision-making, the offering of the wrong insurance products and premiums to certain insurance customers. Despite this potential pitfall, Fong says the insurance industry is working hard to ensure that customers are “ready to respond to the changes that data is inevitably going to give rise to”.  He is confident that they will be benefit both customer and insurer. In other words, good quality data, when used and interpreted correctly, can be a power for good.