Tag Archives: black box

The Future of Telematics Is… Italy

The black box used for telematics makes it possible for insurers to enrich their auto insurance value proposition by adding services built upon data. These services represent a way of de-commoditizing the car insurance policy and are also a source of income. In the medium/long term, such services will become more and more important as the risks covered by car insurance decrease because of technological progress on security and connected cars. These services also increase the number of interactions with the client, creating a richer connection and improving customer satisfaction. This is true both for Italy and at an international level.

There are three macro categories when it comes to services:

  1. Informational services related to the UBI (usage-based insurance) policy, typically delivered through a smartphone app or a dedicated area on a website. These services concern: quantification of pricing adjustment at the moment of the contract renewal based on previous driving behavior; coaching and advice regarding the style of driving; advice on how to save more while behind the wheel; “gamification” that allows a comparison of one’s own driving style with that of friends. A Canada-based company called Intact and Discovery, which is based in South Africa, can be considered among the most advanced examples that currently use this type of approach. According to recent data made available by a telematics service provider, four out of five clients owning a telematics insurance policy check put their driver score at least once a month. Furthermore, there is evidence that remote coaching programs can lead to concrete results in modifying driving behavior.
  2. Product offers related to the client’s automobile — like Discovery has done in South Africa with the Tires or like Allstate Rewards — or insurance policies sold “on the go” using data collected from the boxes installed on cars (a process known as reverse geocoding). Tokio Marine (Japan-based) and telephone operator NTT Docomo have shown that impulse “cross-selling” of low-value insurance coverage is a valid approach.
  3. Services related to the customer journey in a connected car.

There is a vast array of services that can be developed within the connected car ecosystem, and the technology is moving fast. There are start-ups and innovative business models popping up everywhere around the world. To cite just a recent Italian example, there is WoW — a digital wallet created by CheBanca! — which has integrated a parking payment service called Smarticket.it.

Services could be observed on three stages of the customer journey:

  • While behind the wheel. Services include bad weather alert, speeding alert, dedicated concierge and even an alert that is activated if the car leaves a pre-defined “safe area” (family “control” options for young or old members of the family). Discovery‘s approach in this field is highly relevant and includes an anti-theft service that signals to the client if the driver has a different driving style compared with the usual one;
  • In case of an incident. Here the Italian market is considered to be an international best practice because of how it has perfected the usage of telematics data to manage services. Many companies here have invested in creating a valuable customer experience by involving partners specialized in assistance. The solutions provided in case of an incident start with contacting the client and — depending on the gravity of the event — continue with sending help directly and taking care of all the logistic and case management problems that can arise. Innovation is now focusing more on simplifying the FNOL (first notice of loss) procedure. One such example is Ania, Italian Association of Insurers, which has announced for 2016 the launch of an app for FNOL.
  • While the car is parked. Beyond locating and recovering the car in case of theft, the blackbox can send alerts when the vehicle is moved or damaged in any way. This also allows a driver to locate a parked vehicle. There are three Italian companies – TUA, Cattolica and Cargeas – that have recently launched innovative value propositions for parked cars. One of the best practices is the street sweeping alert by Metromile.

In this new service ecosystem, insurers will find themselves forced to co-compete (that is collaborate and compete) with different actors that are active in the connected car sector.

Italy is at the moment one of the most advanced countries in terms of service development connected to telematics; they have become mainstream, not just a niche. At the end of 2014, telematics represented 15% of motor insurance sales and renewals in Italy, reaching 30% in some regions, as underlined by a recent analysis by IVASS.

This creates the perfect conditions for the consolidation of approaches driven by insurance companies.

5 Value Levers for Auto Telematics

Telematics could be one of the most relevant digital innovations in the insurance industry, directly affecting results. Worldwide diffusion of telematics-based motor insurance policies is currently at an early stage, but the best practices achieved levels of penetration higher than 20% of the motor portfolio. The diffusion is growing fast, with well-recognized benefits for the motor insurance value chain.

Looking across countries at best practices, it is possible to identify five value-creation levers:

  1. Risk selection
  2. Pricing (risk-based)
  3. Value-added services
  4. Loss control
  5. Loyalty and behavior modification programs

1. Risk selection

Telematics can be indirectly or directly used to select risks at an underwriting stage. As a matter of fact, products subjected to steady monitoring through telematics indirectly discourage purchase by risky clients, hence limiting adverse selection and fraudulent intent.

Data collection can directly improve the overall quality of the underwriting process, allowing price adjustments or covenants and options related to what the monitoring finds.

For instance, Progressive’s Snapshot provides:

  • a device that measures client driving style;
  • a predictive approach based on data collection;
  • a discount based on information gathered.

2. Pricing (risk-based)

Through telematics, a steadfast monitoring of “quantity” and “level” of risk has become possible. The risk can be calculated on the basis of information monitored continuously, directly determining pricing for individual customers. This may cover usage. Premiums can be adjusted within the year the policy covers, or there can be a discount the following year.

There are solutions such as PAYD (pay as you drive) policies that monitor mileage (with different weights for different time and itineraries) and compute a premium adjustment. PHYD (pay how you drive) policies, instead, integrate information gathered on mileage with an analysis of the client driving style, defined through both mileage and driving behaviors (the number and the intensity of accelerations and stops, driving timetables, speed and other variables).

3. Value-added services

Value-added services can be offered to the insured by the insurer or partners to exploit data detected and sent via telematics. Some examples related to the automobile business are:

  • Car antitheft systems through an installed back box;
  • Emergency services with automatic claim detection or buttons for direct-dialing the assistance center;
  • The possibility to link the telematics device to a payment system (and confirm via smartphone app) to authorize all car-related transactions, such as parking, tolls and refueling.

4. Loss control

Telematics — based on a box installed within the car — also allows for the use of data detected by sensors to limit the loss ratio of the motor portfolio. In this sense, telematics enables the development of claims management processes that are faster and more efficient, by anticipating:

  • The actual verification of the claim (anticipation of the first notice of loss);
  • The direct contact with the client for description of the claim;
  • The attempt to use agreed body shops.

The use of structured information coming from telematics sensors optimizes claim evaluation, improving fraud detection and providing more information during any eventual in-court processes.

5. Loyalty and behavior modification programs

Behavioral programs are basically approaches that exploit information gathered on comportment to direct clients toward less risky solutions.

This can be fairly achieved through the inclusion of telematics devices and measurement of risky behaviors.

Discovery’s Vitality Drive has applied this approach with a proposition based on:

  • “Black box” requested by the client to have access to the loyalty system, with a monthly fee;
  • Drive style monitoring and reporting through feedback;
  • Incentives for other “virtuous behaviors” (car maintenance, driving courses, …);
  • Cash-back fuel expense, related to the score of the driving style and of other monitored behaviors.

The telematics business evolution — from a niche underwriting solution focused on younger and low-mileage drivers to a mainstream solution broadly applied on motor portfolios — requires the creation of an integrated approach based all the five levers. This approach has the potential to be a real game changer in the motor insurance business.

How the NFL May Fix Workers’ Comp

I have a whiz bang idea for solving that pesky investigation issue that surrounds every workers’ compensation claim.

This idea will clearly get me that Nobel or Pulitzer Prize. Either one. I’m not fussy.

It came to me while I was reading an article about the NFL boosting its statistics tracking and accuracy with the use of RFID tags in the players’ shoulder pads. It seems these amazing little chips will allow NFL statisticians to know “real-time position data for each player,” as well as “precise info on acceleration, speed, routes and distance.” This is part of the NFL’s “Next Gen Stats” initiative for fans.

For those who are unaware, RFID (radio frequency identification) technology is the hot new thing. Essentially, an RFID tag contains a passive ID chip that can be activated by receivers as it passes near them. The tag requires no battery power and is highly reliable. Stores like Walmart now use them extensively to track and monitor inventory changes. Even my Florida SunPass tag uses one. The small sticker on my windshield allows me to zip through tolls and access parking at Tampa International Airport without talking to anyone or even rolling down my window. Of course, the tag also allows the state to bill me for that activity and serves to notify the NSA that I am on the move again. But the NSA probably already knew that. The complete loss of privacy is a small price to pay for not having to chat up a friendly toll taker.

I am so glad the NFL has gone with RFID. It is a much more reliable technology than those old scanner barcodes. That was a disaster — having to get the player to run into the end zone six times before the scanner could capture the touchdown — but I digress. . . .

While the article on the NFL and RFID was prattling on about all the useless stats fans could now have access to, I was thinking in an entirely different direction. I recognized that the NFL has inadvertently invented the personal “black box” for workplace accidents. Think about it. This is a technology that could be employed in offices and factories all over the country.

Employers could easily monitor “real-time position data for each employee,” as well as “precise info on acceleration, speed, routes and distance” as employees move throughout the day. An RFID-enabled wearable could tell accident investigators if an employee was running when he slipped and fell down the stairs, as well as how many rotations he took as he progressed to the bottom.  The tag could determine that an employee was idle in the break room at the time she claimed to be straining her back on the loading dock.  And biometric sensors added to the RFID wearable could actually cross reference stress levels and physiological indicators to the time and location of the accident, giving a clearer view of events than ever before possible.

It is just like data used from airplane black boxes to reconstruct what actually happened to cause an accident. I am telling you, this technology could be a tremendous boon for risk managers and accident investigators everywhere. But why should they have all the fun?

Safety professionals could leverage the same technology to prevent accidents in the first place. Restaurant servers would no longer have to yell “corner” or “door” when traversing areas with visual limitations. Their RFID-enabled monitors would send real time location updates of other employees in the vicinity to heads-up displays located within employees’ Google Glass. The system would issue potential collision warnings similar to those in today’s aviation industry.  I’m telling you, Big Brother really may have all the answers after all.

Unless, of course, all the employees were watching internet porn on their Google Glass heads-up displays, and no work would get done anywhere. On the plus side, biometric sensors should pick up signs of unauthorized porn viewing, so it may be controllable after all.

The remaining challenge will be the design and implementation of the RFID biometric wearable devices. Will they be embedded in the work clothes or uniforms, in bracelets, necklaces or other accessories or simply implanted in our skulls? For the record, I do not recommend the skull implant method. My wife tells me my skull is so thick, the signal could never get out. Also, multiple sensors may need to be deployed on every employee, such as in shoes and on the head. This would be helpful for a truly accurate rotation count on those extended fall injuries.

In the end, we may all be wired to the hilt, with no more need to verbally communicate in the workplace. But we will have our personal black boxes. We’ll all end up as fat people in our little floaty chairs. But if we over-sensored tubbos have a collision, our wearable technology will give investigators a much clearer idea of what went tragically wrong.

Even though the idea is somewhat creepy, and I am largely joking, I think we may actually have something here: black box wearables. Coming soon to a workplace near you.