Insurance Telematics is ready to downshift and accelerate with big data
The insurance industry has revolved around data since its earliest days. The very success of insurance companies has always depended on their ability to collect, understand and act on information about their clients.
In the past, insurance companies relied on information provided by public authorities, as well as the data produced by their own claims and cost management activities. Today, the flood of available new data is set to transform the industry. The steady development of insurance telematics has driven the insurance business straight into the realm of big data. And big data is driving insurance telematics into the future.
Automotive telematics devices are collecting data as you read this, every second and around the globe. Standard basic data collection includes date, time, speed, longitude, latitude, acceleration or deceleration, cumulative mileage and fuel consumption, but can also monitor a range of other parameters ranging from road temperature and conditions to tire pressure and axel torque. The point is that standard data collection alone adds up to anywhere between 5 to 15 MB of data per client per year. Thus, a client database consisting of 100,000 vehicles could easily produce 1 terabyte of data in one year. Octo Telematics has 3.7 million clients worldwide and a database of 61 terabytes!
Today, insurance telematics faces the challenge of developing new analytic algorithms for pattern recognition that can provide meaning to this vast ocean of available information. Pattern recognition is the process in which sophisticated models correlate mobility data with many other data sources (demographic, social, environmental…) and provides insights that profile drivers behaviour. Once the data has been mined and crunched – as the industry jargon goes – insurance companies can use it to develop a wide range of predictive models and custom-tailored pricing schemes based on the driving record and behaviour of individuals and/or groups.
We are entering a new period in which the creative sourcing of data and cutting-edge analytics will determine new products and services and thus a net competitive advantage. Moreover, real-time data monitoring is a further key element that will reshape the insurance and automotive industries.
And not only is there already evidence that real-time data monitoring is influencing drivers and changing their driving habits for the better, but a YouGov research project found that 64% of people believe that just possessing a black-box insurance policy will significantly improve driving behaviour.
Connected cars – not necessarily self-driving cars, but cars that are fully integrated into a larger smart city – will introduce one of the greatest shake-ups in the insurance industry. And the time has come. Juniper Research predicts that by 2019, 20% of the car industry will be made up of connected cars, a market worth up to US$40 Billion in revenue, double the size of today’s market.
Automotive makers, in the meantime, are exploiting big data to think ahead and move from diagnostics to prognostics, allowing fully connected vehicles to learn by experience and actively improve customer experience. Vehicle smart systems can forecast where a driver is headed based on the time and the day or interact directly with the information provided by smart city facilities. Intelligent systems employ predictive-user experience to suggest alternative routes or provide greater comfort, for example, by automatically heating or cooling cars. Even more importantly, data collection from telematics devices means that an intelligent system can alert drivers of impending problems, ranging from motor issues to tire consumption, before the car breaks down on a highway or is involved in an accident. These new features and driver behaviour will become a full integrated system with many benefits including enhanced safety, lower costs of ownership and environmentally friendly (minor impact on pollution, city planning…).
While the idea of a smart city – a city that interacts and adapts to all the information it receives from myriads of sensors, including cars and road networks – may still sound like something out of science fiction movie to us, this is exactly where we are headed. Big data is ushering the future into our lives. Connected cars are quickly becoming reality and self-driving cars will be next.
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