Weekly Wrapup: Auto carriers turn to tech to spur better driver habits

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The Weekly Wrapup is an analysis of the week’s insurance tech news from the editors of Digital Insurance.

Claims costs related to distracted drivers are on the rise, and auto insurers are looking to a range of digital solutions to mitigate the practice. With Distracted Driving Awareness Month coming in April, carriers are looking to leverage the attention to advance these solutions in the marketplace.

S&P Global finds incurred auto losses for insurance companies grew by seven percent to $154 billion in 2017. That follows a 13% spike in 2016, the first time the industry had suffered double-digit auto losses since the turn of the century. Much of that increase in recent years is blamed on distracted driving, lower gas prices and severity of claims—rather than frequency. Making things worse, many late-model vehicles now sport advanced driver-assistance system (ADAS) technology — like video cameras and sensors — that can help prevent accidents, but are expensive to fix when one does happen.

Zendrive, a telematics insurtech tracking phone use for auto insurers and ride-hailing fleets, announced this week that of the 2.3 million drivers it’s monitored over 5.6 billion miles, some 12% are characterized as “mobile-phone addicts.” These individuals are highly prone to calling, texting or scrolling through apps three times more than the average driver, Bloomberg reports. In addition, the company found that laws banning hand-held devices while driving are having little effect on consumers. In the 15 states that have such measures in place, the percentage of “phone addicts” drops only two points from 12 percent to 10 percent.

All this adds up to pressure on the auto insurance industry, which is looking to reduce claims. While awareness campaigns have been popular among insurers for several years, an array of new product and service launches leveraging digital technologies are now trying to buck the trend.

In November, Nationwide selected TrueMotion to capture distracted driving data from members of its usage-based program, SmartRide. Farmers Insurance also launched Signal, a new UBI program that reduces customers' discounts if they look at their phone while driving, last spring. Allstate’s connected-car subsidiary, Arity, has also gotten in on the action. It rolled out a capability for its telematics offering last month, helping carriers identify distracted driving using both phone data and corresponding claims information from the parent company.

Smaller, mid-sized carriers are on the case as well. Arbella Insurance recently announced the launch of its safe-driving mobile app, Wheel Focused. The application, developed in partnership with Cambridge Mobile Telematics, provides feedback to drivers based on five metrics: rapid acceleration, hard braking, sharp turns, speeding and active phone use. Both Plymouth Rock Assurance and Good2Go Auto Insurance also deployed their own mobile apps in recent weeks focused on incentivizing safe driving. Rewards so far include: discounts on monthly premiums, Starbucks coffee, gas and movie tickets.

At the same time, insurers are keeping an eye on macro trends that could reduce distracted driving, while monitoring the habit in the short term. This includes driverless cars and the sharing economy. News this week of Uber’s driverless car fatally injuring a pedestrian in Tempe, Ariz., however, indicates that these solutions are still some time away from coming to fruition. Questions will also arise over liability and coverage. To the industry’s credit, these concerns aren't stopping insurers from mining data to develop ridesharing and autonomous products in the future.

A simpler, more immediate solution to distracted driving could lie in usage-based insurance. For insurers worried about how much they can raise premiums to correct balance sheets before losing customers to competitors or the sharing economy, UBI products could play a pivotal role in cushioning the blow for policyholders. Typically, car owners that opt into telematics programs receive 5% to 10% discounts off premiums off-the-bat. That could be more than the overall increases implemented, leading to more widespread adoption. In return, carriers can capture and analyze even more data—already formatted to their liking—in addition to information received from automakers and telematics consortiums. All this leads to further insights into the driver outlined by the multiple industry initiatives mentioned earlier.

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Usage-based insurance Telematics Big data Claims Mobile technology Apps Insurtech Nationwide Allstate Farmers Insurance