by Jim White, Vice President of Marketing, ATG Risk Solutions
There’s a movement underway in property and casualty auto insurance that is quickly gaining momentum -- Usage-Based Insurance, or UBI. Long talked about and the subject of frequent pilots by large carriers, UBI is being propelled by the proliferation of telematics data collection devices and services. Factory installed “black boxes”, aftermarket systems, OBDII plug-ins and mobile apps are recording data in volumes never seen before, allowing us to know how, where, and when vehicles are being driven. This crush of data (270 million vehicles in the U.S. log nearly 3 trillion miles annually) underscores the critical role ACORD’s Telematics Data Standard will play in the growth of UBI.
A Wealth of Data Sources... And a Jumble of Data Formats
The good news for auto insurers is that there is a plethora of data suppliers. In the U.S. more than 70 Telematics Service Provider fleet management companies (TSPs) and 30 auto manufacturers are equipping vehicles with telematics devices. They are joined by dozens of aftermarket OBDII dongle vendors and developers of mobile apps for smartphones who are offering some form of auto tracking and driving behavior monitoring.
The bad news is there are so many data sources, each using different telematics devices and software, pulling data from different types of vehicles. The aggregated data is a jumble of formats, with no two data sets the same. And therein lies a major challenge to rapid adoption of UBI – data standardization. Thankfully, ACORD has forged the path forward in establishing the Telematics Data Standard, although not all telematics data collectors have chosen to follow it. However, a solution to the many non-standard data sets problem has emerged.
An Open Market for Data Drives Segmentation, Selection and Pricing
As ATG Risk Solutions discovered during extensive interviews with 35 of the top personal and commercial auto lines insurers in the U.S., data standards are key to adoption. In that survey, fully 97% of all insurers responded that they want a standardized, affordable data set, normalized by class and territory, that they can use for underwriting and policy rating. Additionally, 88% said they wanted a “safe driving score”, similar to a financial credit score, that they could use for rating. And 74% indicated they wanted driving data and scores to be transparent and portable such that the customer can use the information for self-monitoring and improvement.
The solution lies in an open systems telematics data clearinghouse, which solves the problem of accessing data on millions of vehicles from many different sources by aggregating data from all available sources, then scrubbing, authenticating and normalizing this data for hand-off to underwriting – all the while adhering to a data standard that can be used by all. Even small TSPs, who lack the size and marketing power to be considered for data partnerships, can now participate in the $300B auto insurance market thanks to the Clearinghouse, providing insurers with additional data sources. The ATG telematics data clearinghouse manages Big Data in a big way, delivering to the insurer a clean, authenticated data set, compatible with the ACORD Telematics Data Standard, that integrates seamlessly into the underwriting process for easy access and use.
In the open market clearinghouse model, the insurer retains complete control over pricing, applying credits as warranted. As a result, insurers large and small can benefit from clearinghouse data, creating unique insurance products and offerings to serve their customers. But it would not be possible without the confidence of knowing that the data on which they base selection, segmentation and pricing decisions complies with the ACORD Telematics Data Standard.
About ATG Risk Solutions
ATG Risk Solutions (ATG) is the leading provider of connected vehicle data and proprietary vehicle safety scoring resources for underwriting and claims for the domestic property and casualty insurance industry. The ATG FAIR Score (Forward Assessment of Indexed Risk) provides a contextual view of how a fleet is performing in comparison to other fleets, by class and territory, taking into consideration such factors as road use, traffic, weather, collision reports, road maintenance and other environmental and operational data. The ATG Clearinghouse offers a trusted and secure means by which the insurer can verify and assess the risk of covered vehicles in a policyholder’s fleet, helping insurers improve underwriting consistency, and helping fleet customers increase operational safety, access insurance benefits and lower overall insurance costs. For more information, please visit www.atgrisk.com.