Gregory Maciag

Telematics is Watching Out for You

I know you're not meant to answer a rhetorical question, but Mark Hooson asks so many in his recent piece on telematics insurance that I'm driven (ha ha) to answer at least one of them. “Is it all a bit Big Brother?” the article asks. No. It isn't. 

For a start, Big Brother doesn't really exist. Actually, the fictional Big Brother doesn't even exist in the story of 1984. The point of Orwell's novel is to warn us of the dangers of totalitarianism, and especially the use of language to disguise and promote evil. Telematics has nothing to say on these topics.

Second, telematics is not a form of surveillance for control purposes. It's a smart means of measurement. Telematics solutions deliver objective evidence that can make the insurance process more accurate, and potentially give us safer roads. Big Brother wants your soul. Telematics wants to save your life.

Hooser stresses that telematics is – so far – a voluntary option, but notes that it is becoming a standard feature on new models. This seems to me beside the point. Wearing seatbelts used to be voluntary, now it's mandatory. But wearing seatbelts has always been a good idea. And it didn't suddenly become an imposition when, state by state, it became law.

Last, I want to mention that the freedom of the road is somewhat of an illusion. The independence of movement we enjoy with our cars is already severely constrained. We have to drive on the right side of the road and stop at red lights. We can't drive across someone's yard or take a detour across a airport runway. We have to be insured. The list goes on.

I believe telematics is benign, and that telematics insurance is a great step forward for both industry and customer. The base technology is beginning to look like a necessary safety feature: “According to figures from the Co-operative and telematics provider Wunelli, 92% of telematics-enabled vehicles reported as stolen since 2012 have been recovered – with an average recovery time of three hours.” As insurers develop their telematics products, we'll see cheering figures about more accurate premiums, and reductions in accident severity.

Big Brother

Telematics: Secret Sauce

There are some business situations where the data you choose to capture or control forms the absolute heart of the business. This is the realm of the secret sauce. If the recipe gets out, you're sunk.  But in many cases, the secret of the business isn't the sauce. It's what you do with the sauce. The ingredients are well known and easily found.

Insurance is the classic example. Carriers can't compete on the nature of the data they hold on risks. But they can and do compete on what they do with that data. “What they do” starts with data quality and runs through communications, analytics, product development, and service improvement.

It's not as if one insurer discovers that, say, the height of a building will be a contributory factor to its stability, and keeps the secret. That knowledge is out there. It's obvious. So – to telematics. I understand pioneers in the field wanting to protect their first mover advantage. But I don't believe the advantage lies in what telematics data is. It's what you do with it.

You and I could draw up a list of telematics data items right now. If you've ever driven a car, you can quickly come up with an exhaustive list of things you could measure related to driving. We might end up with a list that's too long, because we might want to measure quantities that electronic sensors can't (yet) determine – the mood of the driver, say. But our list definitely won't be too short. When it comes to insurance data, the secret isn't the ingredients. It's the execution.  Telematics

Telematics Standards

The industry needs telematics data standards, and fast. The main business reason given is usually about competitiveness. Drivers shouldn't be locked in to one provider at the end of a policy term, just because they can't take their data with them.

One blogger pursues this thought in more detail, and from the policy holder's point of view:  “If you are unfortunate enough to get yourself a bad driving record, then you could be tied to this provider and unable to get cover from any other provider and subject to accepting whatever policy your provider offers at whatever price they decide to set for you. That is if they even decide to insure you. You could even end up being uninsurable and unable to drive legally without ever receiving a criminal ban.”

He or she adds that standardization of telematics scoring would enable regulators to issue a rating system insurers would have to recognize. Once such a system is in place, drivers could train to improve their driving capability, using the published criteria.

These are good points. It's not just freedom to choose an insurer that's at issue here. Standards will also help to guard against customers being captured by companies running unfair practices. They can also be used to improve everybody's driving, so making the roads safer and reducing the risk profile of the business.

From a standards setting point of view, there are two issues here. One is the need for data standards. The other is the need for standard data values. So, we need a standard way of recording, say, swerves. But then we also need an agreement about what magnitude of swerve represents what level of risk element. Then companies can compete fairly, and consumers can make informed choices.

I don't know if the current situation is “the wild west”, in the words of this blogger. But it's a mess that can be avoided.  The New Wild West

Black Boxes for Cars

Telematics has arrived, part whatever. The Department of Transportation's National Highway Traffic Safety Administration (NHTSA) proposes that all new cars have EDRs – Event Data Recorders -  fitted by September 1, 2014.  That's less than 20 months away. Can we have a data standard too, please?

“Some of the EDR-recorded data that the NHTSA hopes to analyze includes things such as vehicle speed; whether or not the brake was activated before a crash; crash forces at the moment of impact; engine throttle level; deployment timing and readiness of air bags; and whether or not the vehicle occupant’s seat belt was buckled.” I know some insurers with a keen interest in this data.    Gizmag

Telematics: Standards Urgent!

Laurence Pritchard gives an excellent overview of the issues surrounding telematics standards in Europe. The European Union is known to punish companies that take advantage of a dominant position to obstruct interoperability – as Microsoft knows to its cost. So, if the insurance industry doesn't get its act together on telematics interoperability, someone could be in the firing line.

But who? There isn't a single dominant player who could be seen to be the obstruction in this market. Without standards, consumers could be locked in. But they wouldn't be locked into just one dominant supplier.

However, Pritchard warns: “There are concerns that, if insurers do not agree data standards for telematics-based products, the competition authorities could step in and force the issue.” The EU may well legislate to enable intervention even in the absence of a single dominant player.

It's clear that telematics is the way forward for car insurance. Everyone in the industry must know there's no mileage (if you'll pardon the pun) in attempting to gain customer lock-in through proprietary technology. Even if a first mover captures a large part of the market this way, they will be rapidly overtaken by a second mover offering the benefits of better, no-lock-in telematics products. The faster the industry focuses on resolving a set of standards, the faster the market will grow.

His Opinion: Telematics providers of other insurers, which would effectively lock the policyholder in to their current insurer on renewal. These issues must be addressed if telematics ... telematics-based technology in cars is by now a familiar story, linked to the European Union Gender Directive being implemented across Europe. ... Francis Abberley ... telematics ...

 

Data for Driving

New insurance data shows how different safety systems can reduce auto accidents. Consumer Reports have a good video showing tests of forward collision avoidance systems. These use radar to sense what's in front of your car, and will even apply the brakes if you don't respond to warnings about a slow-moving vehicle up ahead. Such systems were the most useful approaches, according to the data.

Notably, headlights that move in line with the front wheels were the next most useful systems. These have been available since the 1920s. I guess it makes sense to light where you're going.

The lesson I take from these results is that the data that counts is not necessarily data generated by a vehicle in traffic, but data released through insurance claims. To put it brutally, we can only learn about accidents from accidents.

When talking about telematics, we need to take care that we don't assume all future improvements on the road will derive from on-board devices or roadside systems. It may also be that data acquired from vehicles and roads can be used to discover accident conditions that we can't see with the human eye. Also, insurance data can help us distinguish between where telematics can help, and where other approaches – like car design or road layout – can contribute to greater safety.  Consumer Reports