Thinking

Insurtech Riding Shotgun

It’s a fact that you are a better driver than all the others on the road.
We all know that.

And so it’s only right that you should pay less for your insurance. Of course. We get that. Why should your premium be based on your age, gender and mileage? You haven’t had an accident for ages. Well, not one which was your own fault entirely. Nor, do you speed unnecessarily. Only if you’re running a little late and that’s okay, isn’t it?

Well, as a reward and to make sure you pay less, we’ll stick a bit of tech in your car to show those insurers just what a good driver you are. Can’t imagine you’d object. Why would you?

And so it begins.

THE CAR THAT NEVER LIES

In the past few years telematics has taken hold and is disrupting car insurance markets globally. Cars are rapidly becoming smarter than their drivers.

Monitoring systems are redefining the moral hazard of the traditional insurance model and making car insurance a useful passenger. That’s as long as you want them sitting alongside you.

More and more insurance companies are now using technology installed in the driver’s car to generate policy premiums.

With the traditional insurance model, the premium doesn’t reflect actual driving habits or patterns, rather that of the driver’s demographic average. Telematics software inside the vehicle of the policy holder can now monitor individual driving behaviour and generate a fairer, accurate insurance premium, representative of the driver’s actual risk.

The tech can either observe driving style, taking into account factors like braking speed and acceleration, known as the pay-as-you-drive model (PAYD), or simply monitor mileage to assess your road time and consequent accident risk, known as pay-per-mile (PPM).

WHO’S IN THE DRIVING SEAT? (See what we did there?)

One company, Ingenie telematics hit the UK market in 2010, receiving a valuation of over $100m after just a few years of trading and are now partnered with insurance corporates LV=, Covéa and RSA as well as others.

Following in their footsteps is Metromile, billing themselves as the only PPM insurance providers in the US, also provides drivers with an app which receives data from the black box installed in the car. Drivers can then access a wealth of data including diagnostics of the car’s running condition, the ability to track and optimise trips and even a tool to help find your missing car. Think ‘Find my iPhone’, just bigger.

Interestingly, the company has also created a service specifically for Uber drivers – providing an intelligent solution for insurance premiums recognising whether a trip is for personal use or carrying passengers.

THAT’S TODAY. WHAT ABOUT TOMORROW?

Telematics is firmly embedded the insurance market now, with developers improving the model daily. But what other tech developments can we expect to see continuing to improve the car insurance experience over the next few years?

THIS WILL BLOW YOUR MIND.

Remortgage your house. Sell your kids. You’ll want to invest in this one.

Over at the very clever aerospace giants BAE, they’re developing something called the ‘Smart Skin’. Who says disruption doesn’t come from within corporates?

Their engineers are currently developing a spray on ‘skin’ consisting of thousands of micro-sensors as small as dust particles for vehicle components which relays data on its condition to the internal computer.

In the event of an accident, the intelligent ‘smart skin’ monitors every component and function of the car and can, in real-time, calculate and relay how much damage has been done, in what location, and what needs to be replaced.

Specific accident information like the speed at which you were travelling, your direction of travel, and location could be instantly transmitted to the insurance company from the internal computer to ensure a fully-informed adjuster decision is made, eliminating timely claims processes.

Alright, so the concept is currently being developed for aircraft. But it’s not difficult to see the potential this type of technology has for the car insurance world.

BIG BROTHER BIOMETRICS

Another interesting development was the announcement a few years back from Ford.

They released information that they were developing biometric monitoring equipment embedded in the seat and steering wheel of the car, which could observe driver biometrics such as heart rate, respiration and body temperature.

Ford say the technology is first and foremost being developed to improve driver safety, but there are potential benefits within the insurance industry also.

The biometric data, which can indicate stress levels, would allow insurers to evaluate driver style to improve PAYD insurance models. Drivers could even be rewarded for maintaining low stress levels during their drive – however then situational context then comes into play and it all gets a little complicated.

Ford aren’t alone in this area though. The tech has similarities to that being developed by StealthHealth, an American startup creating a physical monitoring system checking the health and physical status of the driver. Most interestingly, all their sensors are tracking this information ‘from a distance’, using sensors without the need for physical contact.

DO WE REALLY WANT ANOTHER BACKSEAT DRIVER?

As with most of the excitement around the Internet of Things (IoT) this is all tempered with the realism of just how ready we all are for that real-time data transfer between car owners, insurers, and repair shops.

Not only technically, but personally.

Do we really want our insurer to know when we had a ding? Surely we’ll let a couple go and try and fold them in to a bigger claim?!

Despite the debate for its potential uses, the technology being developed in this area will provide insurance companies with a better understanding of their policy holders whilst driving.

But achieving a consensus across the board on the type and amount of data exchanged, and the security risks involved, may be a sticking point.

Technology is changing our attitude to car insurance. Not only the driver’s attitude to their own risk, but also to the insurance product itself.

Surely, if you are the better driver you believe you are, then why not? Technology is bringing a fairness to insurance in some way mending the relationship between driver and insurer, making it a product consumers want to buy, rather than be sold.

 

If you’d like to learn more about the companies changing the face of the insurance market, make sure you read our Disruption Report 2016 | Insurance

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