As Insurers See Value of Vehicle Telematics in Claims Handling, Access to Data Could Change

By 2025, 104 million new cars are expected to have some form of connectivity, according to a report on telematics by Ernst & Young.

Because customers have more control, telematics offers the potential for better risk management and more consumer touch points, the report stated. In addition, as insurers gain access to more detailed data they will need to develop strong partnerships with auto makers, the report noted.

A vast array of data can be collected from cars. Everything from acceleration, deceleration, braking patterns and the location of where the car is being operated can be obtained from engine control units (ECUs), the computer systems within cars, according to Donald Light, director of Celent’s property/casualty insurance practice.

The data is a goldmine for insurers and telematics providers which use the information for pricing and underwriting. Light says the next logical use is in claims. He cites the example of using data to determine allocation of responsibility for an accident, rather than relying on police reports and photos.

“That information is just there, that is, the cars are designed to generate it and possibly store a bit of it, but more likely, kind of stream it out real time,” Light explains.

A usage based insurance (UBI) device, also known as a dongle, is installed in a car to obtain the data collected by the vehicle.

“A dongle is just kind of a transmission device basically. It may store some of that data, but then passes it on to a data store, either operated by an insurance company or maybe an intermediary. It’s a great system, but the automobile insurance companies are leaving a lot of money on the table,” adds Light.

At some point Light expects auto manufacturers to wake up to the possibility of charging insurers for telematics data, cutting into the insurer’s potential profit. Auto makers could even become insurers themselves, he suggested, as General Motors Acceptance Corporation (GMAC) once did.

So what happens if auto makers stop giving insurers the data?

Auto manufacturers withholding telematics data is a viable concern for insurers. Lights says this could be alleviated by sharing revenue.

The private passenger and commercial auto insurance market is estimated to be worth more than $200 billion, according to 2013 figures from A.M. Best and the Insurance Information Institute. Part of the premium, maybe 10-15 percent, could be paid to automakers, Light says.

This would only apply to new cars off the assembly line, says Light, indicating he doesn’t think automakers can retrofit ECUs on cars already on the road.

Insurers should be ready, says Light. In fact, insurers could use smartphones instead of dongles to obtain driver usage information. He says insurers could develop a mobile app or team up with a third party provider to create an app. Progressive recently announced that it was launching a pilot Snapshot mobile app via a partnership with Boston-based Censio, a company that focuses on creating mobile technology for UBI.

“There’s probably a half a dozen or more smartphone telematics vendors that are in various stages of development or have gone to market. If I was an insurance company, I would definitely add that option,” Light says. “It’s not just from a defensive point of view for what we’re talking about, but not everybody wants to kneel down under their steering wheel and find the darn port. That’s not necessarily attractive to everybody in the world…but having a mobile phone could be more attractive,” Light says.

He says there is concern about the data a mobile phone can capture versus what a dongle can and vice versa, but there’s a large enough overlap to be a viable option

In the end it comes down to how valuable the data is.

“If you’re the insurer knocking on a big auto manufacturer’s door, you have to be prepared to give something up,” Light says. “I think the conversation will turn to sharing revenues or fees or something fairly early.”

Light says that insurers haven’t embraced the value telematics data brings to the claims. He says telematics can provide data analysis of an accident, as well as provide usage information back to underwriting to better price for a particular driver or for particular vehicles.

“The kind of allocation of responsibility and looking for subrogation possibilities is a standard part of adjusting auto claims,” says Light. “Right now, people have to rely on…police reports, maybe photographs of the site. Suddenly, there’s this wealth of information from one or more of the vehicles involved,” Light says. “What were their speeds up to the point of impact? Who braked first? Was there a collision that was actually three miles per hour, was one car sitting waiting to be rear ended at eight miles an hour by a second car? That’s pretty suspicious. There’s a wealth of things that I think can make the claim adjustment process more accurate and fair to all parties, not just the insurers but the claimants themselves.”

In a July 2015 blog, Monique Hesseling, partner with Strategy Meets Action, states that telematics is increasingly being considered in claims handling “beyond accident avoidance and driver education.”

Hesseling urged personal lines carriers to consider reviewing telematics data in the claims handling process.

Light, too, expresses surprise that more insurers don’t already use telematics date to enhance claims investigations.

“I’ve covered claims for some time from a technology point of view and it’s always been a mystery to me why more companies haven’t tried to take advantage of claims data…and feeding that back into the underwriting process,” Light says.

He speculates that it could be a result of the industry trying to adjust to new data variables.

The concern over auto manufacturers withholding valuable telematics information may not be necessary. David Fiore, senior product manager at Verisk Insurance Solutions recently spoke about the company’s new offering, Verisk Telematics Data Exchange. It is aimed at complementing existing UBI products but is specifically focused on connected cars. It is expected to launch in June 2016. The company has filed UBI models in most U.S. states to aid insurers and has already announced a partnership with GM’s OnStar.

According to Fiore, Verisk expects to partner with additional automakers. He says insurers will be able to access an applicant’s driving history at the time of the quote.