Telematics—the art and science of information involving vehicular technologies, road transportation, and safety, gathered from onboard sensors and wireless technologies—is fast becoming smart business across many different industry sectors. This technology enables more efficient vehicle, trailer, and container tracking for enhanced fleet management, for example. But more importantly, for the purposes of auto insurers, it opens up an unprecedented granular view of the road habits of individual drivers, transmitting a portrait on which risk may be more accurately judged on case-by-case bases, and making possible the effective implementation of usage-based insurance (UBI).
In Europe, a slow but steady turn toward UBI is unmistakable. Italy, an early adopter, presently sees about 4% of its auto insurance business affected by information derived via telematics. Italian insurers are beginning to offer discounts based on this data, for example to low-mileage drivers. Carriers in Italy and elsewhere in Europe, where UBI penetrations hover closer to the 1% mark, are focused on exploring similar issues: offering maintenance plans, vehicle diagnostics, new car discounts, precision discounts for safe driving, and/or making available more attractive and efficient roadside assistance as part of their policies—even providing feedback to parents on their teen drivers. In the next five years, the penetration of UBI is expected to rise to around 15% in Europe. And that’s a trend that’s expected to continue into the future, with increasingly rapid and widespread adoption.
There’s just one problem: There’s too much information. While it’s arguable that too much information is a good problem to have, the reality for auto insurers is that, in many cases, they are sitting on vast troves of data that they aren’t using at all. They simply don’t have a way to get anything meaningful out of these resources. Many insurers today have already made the commitment to telematics. They’ve got the devices and they are gathering the data. Yet for now they are simply letting the gigabytes and terabytes and petabytes grow staggeringly high. They haven’t found a way to conquer the problem of extracting useful and actionable information out of that data.
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