Transcription:
Louisa Harbage-Edell: (
Welcome. Thank you all for joining us today. For those of you who work in or tangentially to the auto insurance industry, when telematics data first started to become available over 20 years ago, it was really heralded as this, holy grail, this opportunity to completely revolutionize our industry and if you've been working in it, as long as I have, you may recognize that it really hasn't quite fulfilled that promise. But what if we had telematics data on our entire book of business, not just limited to customers who are willing to opt in, let you collect data on them for six months and go from there, just like we do with credit via a simple API over the next 30 minutes, I'm going to facilitate an informal dialogue with our two subject matter experts. We're gonna talk about how Allstate the fourth largest PNC insurer in the United States is leveraging just that sort of technology brought to them by Arity a mobility and data intelligence partner to do just that. We're going to go ahead and just dive right in. I'm gonna introduce you our two panelists, Henry Kowal leads, insurance innovation at Arity and is really been the leader in helping to bring this technology to market and Mimi Clark leads, design and development for Allstates usage based insurance, telematics products, including both drive wise and mile wise. I'm Louisa Harbage-Edell. I'm responsible for go-to market strategy for our insurance products at Arity. So with that, telematics is obviously our bread and butter, but not everyone in the audience maybe lives and breathes it the way we do, to level set. When we say telematics, what we're talking about is the kind of data that you collect via mobile devices, onboard devices, even the vehicle itself about where, when and how someone drives. But Mimi, can you just take us through a little bit about what has been the journey and maybe specifically the promise of telematics to date?
Mimi Clark: (
Sure. Louisa. So I'm actually gonna break that up into two pieces because I think there are two different ways to look at this. There's the promise of telematics to the consumer and then there's the promise of telematics to the insurer. So we look at the promise to our consumers, and if we look at Allstates specifically since 2010, we've been in the market and really we promised savings to the customer as the foundational CVP for them. They can connect and save money on their insurance by driving safely. As we continue to evolve our programs, historically, they have been benefit only programs. Up until the last few years, we've really kind of pivoted into how do we actually embed telematics into the rating plan and really the benefit there for customers is even though we're shifting away from a benefit only structure they actually see a lot of fairness in that design because we're now starting to rate them based on how they drive. And we know consumers see that as much more fair than some of the other writing plan characteristics that exist out there today. And by doing so, we actually give them more control and more transparency into how they're driving and how that impacts what they pay. So we're definitely seeing a lot of positive response there from consumers in the market. And then lastly, I think a lot of insurers lean into telematics primarily as a pricing benefit. But we also know that consumers actually believe about 50% of consumers are willing to connect with their insurer as long as they see benefit in doing so and so beyond price. We also wanna make sure we're delivering to customers, other experience benefits by connecting. So part of how we do that today is not only are we showing someone how they drive, but we build a household experience for them so they can see how, for example, their team drivers performing on the road. So that's definitely a benefit for folks with larger households. And then, additionally to that, we definitely offer some other engaging experiences in that mobile app today. So we offer a rewards program that actually gamifies the experience a little bit for the customer. We have driving challenges and it helps drive them back into the mobile app to view how they're driving and see what other benefits they can earn while they're participating. And then finally, we also want to make sure we're advancing the safety component of telematics. There is a benefit to having that continuous connection with your insurer. So one of the latest advancements we've inserted into our experience for our consumers is crash detection. So that we're there for them in the time of need if they do happen to get into an accident. And there are a number of other ways we can enhance that experience for the customer and really help them see the value of telematics.
Louisa Harbage-Edell: (
Yeah, absolutely.
Mimi Clark: (
So I know I mentioned we're gonna talk about insurers, but I need to drink this.
Louisa Harbage-Edell: (
Yeah, no, and you make interesting points, right? Because so much of this is about increasing engagement. I know in past experiences we've seen, if you can even just add one additional touch point, you can increase retention and you've mentioned dozens of additional touch points. So that's huge. You mentioned just briefly the pricing component. I wanna dig into that a tiny bit, because obviously that was the original promise, right? This data being incredibly powerful and its ability to better price and segment and whatnot. I came on right as the end of credit was sort of changing everything like crazy. And the ripples from that Henry we talk a lot about the parallels between those. Could you maybe just talk about the power of telematics in terms of pricing?
Henry Kowal: (
Yeah, sure. A few years back progressive actually essentially said that telematics is one of the most predictive rating variables that are out there even more so than credit. And actually just interestingly enough, yesterday at one of the sessions that I attended, the speakers talked to that how driving behavior data is an actual measure of risk and is really the most predictive variable that we have out there today. And a couple of years ago, Geico admitted that they were late to appreciating the value of telematics and its ability to effectively match risk to rate. And now, as we all know, Geico has a telematics program in place today. In fact, all of the top 10 insurers auto insurers have telematics programs in place in market today. So at Arity, we've developed our drive site score based on billions and billions of miles of driving data with associated claims losses. And with our drive site score, we're able to identify the 20% riskiest drivers and of those we're able to segment that and find that on average, 50% of those drivers are riskier than the typical driver. So really what that means is that it just goes to show the power that telematics has in terms of risk segmentation. And as I mentioned earlier, remember that, driving behavior is an actual measure of risk. It's not a proxy, right? It's not a proxy like credit like education or even age. And the other thing I wanna point out Louisa as well, is that given the current regulatory environment, credit and other traditional rating variables are currently coming under regulatory scrutiny. So I think that further underscores the importance of telematics as a driving risk rating variable.
Louisa Harbage-Edell: (
Yeah. I know the casualty actuarial society just the spring released a series of papers with some recommendations on how to look at and think about some of those traditional variables to ensure they're not including any bias. So certainly something that continues to be top of mind. Well, Mimi, Allstate obviously has one of the most successful programs out there. They have both the largest continuous connected program as well as the largest paper mile program and have significant take rates in new business. Even given that, it certainly is not the whole book of business and it's taken us 10, 15 years to get to that point. Are you surprised by the rate of change or maybe the amount of friction that we've encountered?
Mimi Clark: (
Not really. I was in a session yesterday where I heard roughly across the industry, there's about 6 to 8% penetration, across the industry. Now that surprised me. So Allstate, they've definitely seen over a hundred percent increase in consumer adoption over the last couple years for a number of reasons. But recently we've seen when we offer both Tele products and market today, about 40% of our new business customers actually go through and make that connection, whether it's through our device based program or a mobile program. But to your point, there's definitely still significant ways to go in terms of consumer adoption. And I think historically when we look at that, there's a couple of reasons why one of those is we have seen a real difference of methodology in terms of capturing that data over time. So, Allstate was in the market in 2010 with an OBD two device that quickly evolved to a mobile app. Several years later in market. I know other insurers, the mobile app is really increasing in adoption today. But other insurers still use other methods of collection. And I think, all of those have their individual points where it is a struggle for the customer to establish a connection sometimes. There are unique hurdles to all those different types of connection. And so I know when we see even just from looking at the mobile app side, we see a significant portion of our business being written with intent to participate in telematics, but there's a huge gap from that to actually establishing the connection. So, we need consumers to actually buy into establish, establishing that connection, but also making it through some of those hurdles that exist today. So, beyond point of sale them saying like, yes, I would like to participate. We need them to go download an app, set up, log in, set up, establish all their location settings. And not all of our customers are as tech savvy as this audience probably is today. So it is kind of a hurdle to just establish that connection, even when there is some intent and I think any bump along the road there kind of disincentivizes them off that path. And then in addition, we need our agency force engaged to help customers through those hurdles to talk about the benefits of the products at point of sale set those expectations around connection. And so we see some hurdles there as well in terms of getting agents to buy into the product and we really work to help make sure they understand the value that we see and the value for their books over time to really make sure they're speaking about the value for the customer.
Louisa Harbage-Edell: (
Yeah. I know. As a company that frequently consults on telematics programs, we even see pushback. As much as we talk about understanding the value of the data, we even see pushback within companies on, do they understand the return on investment? Cuz these programs can be a lot to stand up and, even knowing all of the top 10 know how programs, which is what, somewhere around 75% of the market, there's still a lot of other companies that are still working to get up and running with programs out there. So, maybe this is a good point to pivot. We've talked about the frustrations. Henry, can you describe maybe a little bit about how Arity is evolving to meet the future?
Henry Kowal: (
Sure. Yeah. So at Arity we've essentially, we've redefined, the telematics paradigm. And what I mean by that is that we're now able to provide a driving score at point of sale through our new product called Arity IQ. So it's actually interesting, a few years ago when I was working on the carrier side, I was on a panel similar to this. And we were talking about, in the future, being able to ping for an individual's driving score the same way as we ping today for credit, where as we ping for other third party data that ensures use to build a customer's quote. And here we are today, 2022, and that future is now a reality because of Arity IQ. So essentially an insurer can place an API call to our Arity IQ database, which consists of just over 40 million drivers in the US. And they can ping for an individual's, driving risk score. So what that means is that you don't have to ensures, don't have to wait to collect the driving behavior data of customers. They don't have to enroll them in the telematics program, way during the monitoring period to collect that driving information. We actually already have that driving information collected. Now you might be thinking, so how do you collect that information? So, we get that information through relationships that we've established with different mobile app publishers. So a few examples of that one, we partnered with life 360. Life 360 is a family security app that they provide to their users. And within their app, we have embedded Arity's SDK around crash detection feature. So we're providing safety and security to users of that map through that feature. Another example is, gas buddy, the gas app, which I think is very popular right now, given the price of gas right now. And within that, we also have partnered with gas buddy, whereby we provide algorithms to help users identify the best kind of driving behaviors to optimize their fuel efficiency. So essentially by providing these features, these value added features in these apps, consumers consent to having their driving data collected. So that's the first consent that a consumer provides around the data. And then when those same consumers go to shop for auto insurance, they provide their consent again for participating insurers to be able to use their driving data, to obtain their driving score from Arity IQ. So what I wanna stress there that, this is the consumer's data and the consumers do have to consent to having their data used. So in the end, Arity IQ again is game changing. We're changing the way we're able to rate customers using telematics in that we're able to ping for their actual driving score at point of sale. So again, I think that's very game changing as somebody who had worked on the carrier side and now works at Arity. I'm really excited about this product and the potential for insurers to be able to use this product to competitively price customers grow their business, but also grow their business profitably because we have their driving risk information.
Louisa Harbage-Edell: (
I know we have some colleagues who describe it as meeting customers where they are in apps and things they use every day, which is a fun way of thinking about it versus having to get them over the hurdle, right. When they sign up with an insurance company, right. So Mimi, Allstate is obviously one of the first adopters of this new technology, to address the elephant in the room for those of you who may not be aware, it already is a subsidiary wholly owned by Allstate. Allstate is not the only insurer, leveraging this technology. And in this instance, Allstate is a customer. They are buying this technology from Arity, and you certainly wouldn't be paying for it and investing in it and prioritizing it within your own growth strategy, if you didn't believe in it. So can you talk to us about why is Arity IQ the right solution for Allstate?
Mimi Clark: (
Sure. So I know even in the previous session, from nationwide, we heard a lot of the emerging trends within the industry. We've talked a lot about increasing severity, profitability pressures, inflation, and even some of our more predictive rating variables, coming under scrutiny like credit. And so, we believe to win in this environment. We definitely need to lean in further to telematics any way we can. So over the last few years I mentioned earlier, we have kind of revised our approach to how we embed telematics in the rating plan to enhance predictiveness of our models. But one of the disadvantages there is today we see less than half the book actually connecting and being able to be rated on that data. So to have that at point of sale, to enhance the predictiveness of our rating plan and really help boost our close rate is definitely as Henry said, a game changer for us, and I think, it's easy to see the benefit of the safest drivers out there and being able to offer them the lowest price. Really for all of our drivers, we see it as a way to offer a fairer and more personalized price and a big advantage for us by having that data point of sale is we'll definitely be able to reduce some of that renewal disruption we see today in some of our other pricing models, when we can only rate on that data at renewal, we are seeing some disruption for customers. So by being able to weave that into our rating plan at point of sale, it really helps create a more seamless customer experience for our customers. So, I mean, yeah, we are super excited about integrating with Arity IQ this year. You guys have been phenomenal partners. We can't wait to get into market and measure and see how it performs and just continue to learn and adjust.
Louisa Harbage-Edell: (
Excellent. Well, I have a few other questions for you here. I know I'm personally excited that Allstate is leading the way on this, and I can't wait to see how it plays out. But I wanna give our audience a chance to ask questions if they have any. So maybe before I continue, are there any questions from our audience,
Mimi Clark: (
The bright lights?
Louisa Harbage-Edell: (
So we talked a little bit about some of the questions we get around privacy and things like that, Henry, I know strive to be on the cutting edge of providing options and privacy policies and things. Is there anything else that you might add to the way we think about ensuring that, because obviously we're partnering with a lot of different companies who have different privacy policies along the way.
Henry Kowal: (
Right, so it's working with our partners, mobile app publishers, in this instance on stressing the importance of data and privacy and really who owns that data. IE, it's essentially the customer and we work with, I would say primarily top tier mobile app publishers. So I think they also believe in and advocate for consumer, consumer privacy and data security and so forth. So that's a relationship and a mindset, that we look to establish with our mobile app partners. And then at the same time, our product, I should say, Arity IQ is FCRA compliant, right? So, it abides by the FCRA regulations that are in place today. And so an important factor of that again, is obtaining consumer consent before an insurer can actually call to the Arity IQ database to get a consumer's driving score. That's given, that's not negotiable. That's how FCRA products work today. And it's similar to how other credit reporting data is used, whether it's credit score information, whether it's clue, NVR, motor vehicle, violations and so forth, right. Consumer consent has to be gained first. So insurers, I would say, are already accustomed to working with these data privacy issues and, this is something that Arity also supports.
Louisa Harbage-Edell: (
Excellent. Well, I think we've hit the end of our questions if there's nothing from the audience, happy to give you all a little bit of your time back today and we can wrap it up there.
Henry Kowal: (
Great. Thank you.