As insurance telematics gains momentum with consumers, the technology has become ever more sophisticated and reliant on customer outlays for smartphone capabilities and OEM automotive technology. But is that fair to lower income consumers? INN spoke with Bill Hartnett, head of innovation at ACORD, about trends in telematics and the possibility of greater regulatory oversight.
INN: What are the emerging trends you see in the insurance telematics space?
Bill Hartnett: This is a fast moving part of the industry, yet it’s being subsumed by the Internet of things; cars are just one of the things now connected to the Internet. It does look like the auto manufacturers are starting to coalesce as well. But for the near future, it’s going to be a combination of things. I’m sure the dongle and onboard devices will be around for a long time, and cell phone technologies are interesting as well. It’s going to be a non-homogenous world for some period of time, which begs the need for more standardization in the data we are exchanging.
INN: Why haven’t the ACORD standards for telematics been more widely adopted?
BH: We developed the standards with a bunch of smaller vendors years ago, but no one really committed to them. That’s not uncommon with standards. Now that there is so much energy and enthusiasm around connected-car issues from major manufacturers, they really have a vested interest in putting together some kind of standard to exchange data with insurers. It makes it easier for them to monetize the data they are already collecting.
The interesting thing is that Verisk seems to have hit upon the same opportunity by
INN: Insurance telematics seems to have shifted gears from dongles and devices to smartphone apps, such as the new one from Progressive, and now exchanges, such as the one announced by Verisk. How much momentum is behind that movement and where are we in terms of that shift?
BH: There are broad socio-economic differences that determine what technology is available to people. The gentleman from GM [a presenter at Telematics USA] said he drives a Cadillac, which soon will have autonomous driving capability on the highway. Then there are many people still driving 25-year-old cars. Another presenter today said telematics capabilities are available in about 42% of cars; 58% don’t have that available right now. When you are offering discounted coverage that requires this technology, is that discriminatory? And even if you offer it via smartphones, there are only so many people who have smartphones.
Regulators are going to seriously look at these technologies to determine whether the industry is – to use a forbidden term – redlining, even if it is unintentionally, by picking technology that only wealthy people can have. That’s something regulators have hit on, and they way they want to approach it is to take any available source of data, whether it’s dongles, cell phones, or built-in technology, like Sync in Fords, or Onstar in the GM cars, and put all that together in a centralized data depository.
What we would like to do at ACORD is be the data standard that underlies that. Whether or not you think Verisk’s centralized data depository is the way to go, there’s still a need to standardize the data so that everybody can work with everybody else.
INN: So if the industry is getting more reliant on consumer technology to deliver these discounts, how can the insurance industry demonstrate that it’s not discriminating against lower income people?
BH: When you think about new technology, it’s usually adopted first by more wealthy individuals, and there can be unintended consequences to that. On the flip side of that, cell phones may be the most democratizing technology in the world right now. Pretty much everybody, even in developing countries, has access to a cell phone. But what level of phone do you have to have before you can participate in that economy? Some of the “feature phones” may be good enough.
[A presenter] from Towers Watson was talking about “ambient data collection.” If you have a phone in your pocket, smartphone or not, by triangulating off towers, if you opt in, we can collect location data and get a lot of the same data you would collect from GPS. We could make that data available so that people with lower income levels.
