The emergence of telematics as a data gathering tool for individualized pricing hold promise for the insurance industry. User-based insurance (UBI) has allowed auto insurers to more accurately track driver behavior, analyze risk, and fairly quote auto insurance products. The data derived from in-vehicle telecommunications devices also provides a basis for predicting trends in driving habits, road usage, and other metrics useful not only to insurers but society as a whole as we address infrastructure issues in this country that deal with our system of transportation.
As a CIO, it is important to understand your role in the emergence of this technology beyond usage-based pricing. As touted commercially by companies like Progressive Auto, a leader in personalized telematics devices (“Snapshot”), it is time to examine the trends in the technology and the various usage scenarios available or under exploration. Telematics offer many opportunities for auto insurers from a pure data and metrics standpoint; however, there are some downside risks associated with continued and expanded usage.
Telematics offer many opportunities for auto insurers from a pure data and metrics standpoint; however, there are some downside risks associated with continued and expanded usage.
Why the focus on telematics and personal insurance? IBM in a July 2014 report stated that more than 26 million connected vehicles were on the road in 2013. With respect to the connectivity of these vehicles:
- 480 TB of data has been collected from these vehicles;
- By 2020, the amount of collected data is expected to grow to 11.1 petabytes;
- Some of the plug-in hybrid models generate in 1 month 25 GB of data.
In a world moving toward big data and the Internet of Things (IoT), the potential of telematics as a data store for innovation and advancement are enormous. CIOs must recognize and prepare themselves to take advantage of this emerging technology to provide opportunities for those companies offering devices.
The Evolution and Promise of Telematics
The emerging trends and opportunities unveiling themselves in the evolution of telematics for CIOs and other technology thought-leaders are rooted in the history of the technology. You are very well aware that telematics is simply the marriage of telecommunications and GPS technology used initially more than two decades ago to reduce traffic fatalities and improve road safety in Europe.
The marriage of GPS technology, a commercial by-product of the Defense Advanced Research Projects Agency known as DARPA, and mobile telecommunication devices is at the foundation of telematics. It is myopic however to view telematics simply as a tracking device that provides static communications from the vehicle’s receiver to it host site. An increase in the number of units available to commercial fleet transportation systems and personal autos has opened the door to the role of information technologists to move the capability needle further than what was initially envisioned.
Current Trends and Developments in UBI
Developers are looking at ways to add additional apps to built-in units as a way to integrate other technologies as well as push the limits as to what is possible with telematics. Moving beyond standard GPS positioning and mileage reporting, telematics has moved toward providing a host of application based services designed to improve driver safety and produce useable data usable to enhance the driving experienced.
Already developers have developed location-based services useful in providing emergency roadside assistance as well as mapping and other features that improve the driving experience. The next generation of telematics will look to automating many of the mundane and repetitive tasks associated with driving. Being on the forefront of developing the appropriate apps that expand the capability of telematics, particularly in the area of personal insurance and the ways auto insurers can gather the data needed to make better risk management decisions will be key to the furtherance of this technology.
Balancing the Expanding Opportunities for Telematics with Privacy Concerns
The data gathered by telematics devices opens up a new world of scrutiny and oversight from Congress and the regulatory community particularly around the issue of privacy. Application development must be mindful of attempts by Congress, such as that most recently of Massachusetts Senator Edward Markey and Connecticut Senator Richard Blumenthal to address the potential for hacking and the stealing of personal and private information. These concerns will be amplified as more users have access to telematics devices and an area more CIOs must take a critical look at is that of safeguarding the integrity of those operating systems responsible for the transfer of data between the data sender and data recipient.
As the technology continues to grow and is adopted by more auto insurers, CIOs stand at the forefront of leading the charge toward greater innovation as telematics continues to grow as a data gathering platform. The future holds great potential for those who understand that telematics is still in its infancy in terms of widespread use and adoption but as more insurers release their proprietary designs, it is up for the network of information technologists to ensure a standard that is easily adopted by all users. Google’s Open Automotive Alliance (OAA) seeks to create a standard with respect to in-vehicle devices that is universal, allowing for the easy development of new apps that can be hosted among different types of devices.