Modern Claims Telematics Focus

Telematics FOCUS

Telematics FOCUS Driving Change

This data tsunami is upon us, and there’s an enormous opportunity to build better products and outcomes for customers, and to achieve better financial results for the insurance industry

Jonathan Hewett 01 Modern Claims

January 2017

Telematics FOCUS

Jonathan Hewett Jonathan Hewett speaks to Modern Claims magazine about the various applications of telematics in the insurance industry, and the role of data in combating fraud, distracted driving, and poor driving behaviours.

Q A

How was telematics technology received by drivers when it was first introduced? Was there any initial resistance?

We tend to find, in all of the markets, that a third of drivers are very keen to leverage on anything that can give them a discount or save them money on their car insurance. The next third is always dependent on the size of the discount – they’re prepared to trade some data or information and then make a judgement as to whether that trade matches with the price discount. The last third simply says, “No, this isn’t for me. I don’t want to be tracked.”

This comes from some research we did about two years ago, and I think that last group is now much smaller, as we’re all more familiar with sharing data in order to receive benefits in the form of reduced prices. It’s very much driven by the availability of the technology; sensors are in everything, they’re a part of modern life.

We’re all keen to get the best possible deals, and to pay our bill, rather than pay the bill of everyone else.

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Telematics are typically seen as beneficial for younger or inexperienced drivers. What benefits can they offer to different kinds of drivers?

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Outside of price, we look at some very important things, like safety and security. If I have an accident, knowing that someone knows my exact location with absolute precision is a great comfort, as is knowing that the accident can be accurately reconstructed and a fair assessment can be made in terms of liability and responsibility. In the most serious cases, knowing that there’s a guardian angel watching over me that can come and help me out is almost a life-saving service.

There’s also ease and convenience. Some of the technology brings the ability to provide preventative maintenance, or to alert people who need to get their car repaired or serviced.

Q A

How has the acceptance and usage of telematics been different outside of the UK?

The biggest difference is in North America, where the application of telematics has been for an observation period, so insurers can understand how somebody drives, then present them with a discount based on how they’re driving. What that doesn’t allow for is the provision of crash and claims service. The market in the USA is now moving, and thus there is so much value in being more efficient around crash and claims, for both the insurer and for the end consumer, which is very important in the American market.

That observational model is becoming a little bit outdated and outmoded, as people come to understand that all cars will become connected, and that a whole range of services and benefits can be provisioned based on the connected model.

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What are the potential applications for the data obtained by telematics devices in the claims space?

This data tsunami is upon us, and there’s an enormous opportunity to build better products and outcomes for customers, and to achieve better financial results for the insurance industry

One of the two big service areas we look at is the first notification of loss, which can be transformed with telematics.

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January 2017

Telematics FOCUS

Telematics is at the heart of this issue; using the connection that telematics creates between the user and the insurer to reward good driving, or to provide a better understanding of the dangers of being distracted at the wheel If a policyholder is involved in an accident, the insurer can make an outbound call to that customer, giving them the absolute first class service that they have ultimately paid for. They can check that they’re okay, give them the right level of help, and take control of that claim event.

It also comes into play when assessing the claim and understanding liability and the quantum of the claim; using data that has forensically reconstructed a claim allows the insurer to make the right decision about how much they pay and what they’re paying for.

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How will Telematics change the claims process and what will happen to the customer experience?

Claims are now customer value propositions. Historically, customers received whatever service was most efficient for the insurer. What insurers can now do, with the data they’re receiving, is build something that is much more orientated towards delivering a top customer experience. It’s changing from being reactive to proactive.

It’s often said that claims is the product that the customer has paid for, but what we’ve seen with telematics enabled policy is a true customer value proposition that claims professionals can be duly proud of.

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Recent apps have allowed smartphones to be used in usage based insurance (UBI) policies. Is there the potential for further development in this form of telematics, and could it replace the traditional ‘black-box’?

A

Smartphones are a huge advantage to the insurance industry.

When we think of telematics, we think of sensors, and sensors can be included in a multitude of different form factors.

Ultimately, the choice of that sensor or telematics device depends on the value proposition you want to provide. Smartphones are great – they’re frictionless, almost, from a customer experience perspective. You simply download the app from the app store, and you can have a driver behaviour scoring device.

What they can’t do, though, is detect crashes and collect sufficiently accurate data in order to reconstruct a claim. In the simplest terms, they’re not secured to vehicles, so in any incident, the device being moved around the vehicle makes the data useless from a crash detection or claims perspective.

They can move people into the telematics experience, though.

What we’re starting to see is the smartphone being used as a ‘try before you buy’ promotion, from which the right customers can be moved into a telematics-based policy.

Where we’ll naturally end up is with a portfolio of devices, where smartphones, black boxes and connected vehicles are all part of the telematics ecosystem.

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What is the potential for the gamification of driving, through telematics and telematics-based apps, in both personal and commercial lines?

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I’m not keen on the term ‘gamification’ - driving is a very serious business. But I do think that telematics has a very important role to play in preventing distracted driving. As cars get simpler and easier to drive and we have more things to be distracted with, accidents are actually increasing rather than reducing, which was one of the theses behind semi-autonomous vehicles.

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Telematics is at the heart of this issue; using the connection that telematics creates between the user and the insurer to reward good driving, or to provide a better understanding of the dangers of being distracted at the wheel.

Q A

How can telematics help to combat fraud?

By providing a more accurate picture of how the end consumer is using their policy. On a very simple level, you’re getting a much more precise picture of a driver. We can know whether they live at the postcode they say they do, whether they only drive 5000 miles per year rather than 15,000, and if they are using a vehicle at commuting times. We can even tell the likelihood of a soft tissue or whiplash injury, based on the detection of the accident. Data and forensic analysis of driving behaviour and incidents is one of the most effective ways of combating fraud.

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How will connected cars and autonomous vehicles impact driving and motor insurance in the next five years?

We’re going to see a very long parallel in this regard. In five years’ time, or even twenty five years’ time, we’re going to see roads being used by autonomous vehicles, pedestrians, regular vehicles, cyclists, horse and cart etc. Our roads are becoming more and more complex environments, in which we need to have an ever more precise understanding of what is going on. We’re working with a lot of the OEMs, and understanding their plans for connectivity and autonomous driving. In that debate, telematics is absolutely vital, so the ability for an insurer to receive and understand data that’s coming from autonomous cars is also vital.

In an autonomous environment, it’s all about understanding where liability sits; is it with software, is it with code, or is it with a driver?

Q A

How do you foresee the role of telematics influencing the broader personal lines market place?

As the world become connected, and as we have sensors in everything, the opportunity for data to inform decision making (be that how to price a policy or how to pay a claim) has to become the bread and butter of the insurance industry.

We already have a device that’s able to detect water intrusion, electricity spikes and gas. We are working on projects with our partners that revolve around tracking pets, and understanding their whereabouts as well as their health.

This data tsunami is upon us, and there’s an enormous opportunity to build better products and outcomes for customers, and to achieve better financial results for the insurance industry.

Jonathan Hewett is CMO of Octo Telematics

Our roads are become more and more complex environments, in which we need to have an ever more precise understanding of what is going on January 2017

Telematics FOCUS

Shaun Quinton With usage of telematics technology on the rise, Shaun Quinton explains how telematics can help to combat fraud, be a boon for business fleets, and he explores the key differences between telematics and black box technology.

Q A

Other than price, what are the other benefits that appeal to usage based insurance (UBI) customers?

Price is always going to be the main driver for people to buy telematics products, but for private car customers there are a few additional benefits. It gives the buyers another choice of insurance, rather than the standard policies offered. In addition, it also enhances vehicle security, because the device also acts as a tracker. Therefore, if the vehicle is stolen we have a greater chance of recovering it and the police have an increased chance of catching the thief. The device can also allow additional services such as roadside assistance. Telematics is very appealing to commercial customers, mainly in the fleet market.

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While UBI policies can be a cheaper insurance option for newer and younger drivers, what benefits might they bring to other kinds of drivers?

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Telematics can be a benefit for experienced drivers across the board, but especially for business fleets. Monitoring their driving behaviours can have an impact on a vehicle’s wear and tear, where things such as harsh cornering will mean that tyres need changing more regularly or harsh braking creates wear and tear on the brakes etc. Improvement of a person’s driving behaviours through monitoring them can reduce the cost of the maintenance of their vehicle and of their fuel use, and can potentially reduce accidents. For business customers, telematics can also be used for tracking their vehicles, driver training and accurate mileage records.

The difficulty with telematics and FNOL is defining the perfect G-force threshold so that we avoid calling the policyholder when they have triggered a “crash” alert by travelling over a pothole or speed bump

Improvement of a person’s driving behaviours through monitoring them can reduce the cost of the maintenance of their vehicle and of their fuel use, and can potentially reduce accidents

Q A

How can telematics improve the First Notification of Loss (FNOL) service?

Good telematics can change the dynamics of notifying new claims. It can change the reactive process of waiting for a new claim notification to come in, to a proactive one where we are calling out to the policyholder. The difficulty with telematics and FNOL is defining the perfect G-force threshold so that we avoid calling the policyholder when they have triggered a “crash” alert by travelling over a pothole or speed bump. If you can get the balance right, the FNOL certainly adds an additional benefit to taking out a telematics product, rather than a standard motor product, because it’s one less concern when an accident occurs.

Q A

What role can smartphones play in usage based insurance?

They certainly play a part. A smartphone app is good for monitoring behaviours, speed etc. for an insurer to base pricing of a policy on. However, they aren’t as efficient as a black box when using them for driving management and claims. This is because they are reliant on the policyholder having their phone on them, turning on the app and having enough battery charge, whereas a black box is fitted and attached to the engine electrics.

Q A

How can telematics help LV= combat motor insurance fraud?

Telematics is extremely useful in combatting fraud. LV=’s use of it has helped us prove that claims which appear to be simple collisions are in fact fraudulent. An example of this is a claim we received where a policyholder had pulled from a side road into a third party. Upon investigation and use of the telematics data, we were able to prove that it was in fact a staged incident. The investigations resulted in proving fraud and a criminal conviction for the fraudulent party.

Shaun Quinton is Motor Claims Broker Relationship Manager at LV =.

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January 2017

Telematics FOCUS

Ben Howarth Ben Howarth examines the changing role of telematics since their introduction, and how they have helped and will continue to help insurers and consumers drive safely and fight fraud.

Q

What was the initial reception to telematics by insurers and drivers when it was first introduced, and do you believe its position in insurance is accepted?

The insurance industry is very supportive of the development of telematics technology, as it allows insurers to understand how individual customers drive and then provide cover to meet their specific requirements. A number of insurers have launched their own innovative telematics products and we are still seeing further innovation in this area.

The technology has a number of benefits for consumers. It allows young drivers, in particular, to demonstrate that they drive more safely than their peers and to have that reflected in the premium charged. It also allows drivers to receive feedback on how they drive and therefore can help them improve and become safer. In addition, it can also help insurers manage claims more efficiently and thus reduce the overall cost of insurance.

A

Indeed, there have even been lives saved as a result of telematics, with the telematics box providing alerts to serious crashes that may otherwise have gone undetected for longer.

Telematics is now a very well established part of the industry, especially for young drivers and in the commercial fleet sector. We are also seeing more insurers develop products aimed at a wider range of the driving public. There has continued to be a year-onyear increase in the number of drivers choosing a telematics policy.

Q A

What role does telematics technology have in the investigation of fraud?

The insurance industry has invested in a wide range of measures to crack down on fraudulent claims, both within individual insurers and through industry-wide initiatives such as the Insurance Fraud Bureau. Insurers are committed to implementing the recommendations of the Insurance Fraud Taskforce.

Telematics has proven a useful tool for the investigation of individual fraud cases, as it can provide valuable evidence. There have been a number of cases in recent years where the use of telematics evidence has helped to secure a conviction.

Alongside other technology, such as dashcams, having a telematics box installed in your car can help give drivers peace of mind that they will not be wrongly accused of causing an accident and that they will not be the victim of a ‘cash for crash’ scam.

What steps do insurers take to protect the data gathered through usage-based insurance policies to ensure customer confidence?

Insurers are committed to ensuring that any data provided via a telematics box is used securely and the privacy of drivers is protected. The ABI and BIBA have published a good practice guide that outlines what consumers can expect when buying a

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January 2017

Indeed, there have even been lives saved as a result of telematics, with the telematics box providing alerts to serious crashes that may otherwise have gone undetected for longer telematics policy and means they can have confidence about how their data will be used. In particular, the guidance provides advice to make sure that telematics technology is used in a way that complies with the Data Protection Act.

Is there a growing trend in the use of smartphones and apps as telematics devices, and could they replace the traditional black box?

As smartphones become more sophisticated and reliable, a number of telematics providers have developed apps that can act as an alternative to the boxes that have been installed in cars. There are several benefits to this, including the option for consumers to be able to trial a telematics policy easily by downloading an app. However, it is also likely that consumers will still be able to choose to have a black box installed if they do not want to use their phone.

How can we expect telematics to develop in the future?

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The major change expected in how people drive over the coming years is the development of automated driving technology. The ABI has been working closely with the Government as they take forward legislation on how insurance will work for these new vehicles. We welcome the fact that the Government has accepted the recommendations that were made by the ABI and Thatcham in the proposals they have just introduced into Parliament.

As vehicles become increasing inter-connected, it is likely that telematics technology will evolve to help insurers better understand how these cars perform and how drivers interact with them. Furthermore, the experience insurers already have with telematics will allow them to develop innovative products that will help give consumers confidence as automated driving technology appears on the road.

Ben Howarth is Senior Policy Advisor, Motor & Liability, at the Association of British Insurers (ABI).

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Telematics FOCUS

David Williams David Williams told Modern Claims how the insurance market is benefitting from telematics solutions, and how it can improve its use of them in order to maximise their potential.

Q

How has the popularity of usage-based insurance (UBI) changed in the last few years, and to what do you attribute this?

A

UK telematics recently hit 750,000 users for the first time, which is amazing. It’s a relatively small share of the market though. In the early years there were difficulties in finding a meaningful discount that competed with general insurance prices, which are incredibly competitive. Gamification, for example with family competitions to see who is the best and worst drivers, was an amazing marketing idea and lots of people have adopted variations on that theme now.

As with any other technology, as time goes by telematics gets cheaper and better. Rather than having just one or two expensive providers out there, there are now so many different options, from devices that need to be factory fitted to those that run on smartphones.

What other benefits do telematics have for different kinds of drivers and policyholders?

Q A

Sadly, 99% of motor policies are based on premium; there’s no real loyalty in the conventional motor market. For older drivers there’s less of a financial benefit, but if you can provide feedback to the customer to help them improve their driving behavior and you can reward that then it’s good for them longer term.

Some people just like the idea of playing the games; I’m sure there are people who have various insurance companies’ apps on their phone because they like the idea of being able to see how they’re driving. Using these apps and games, you can get a massive amount of data, so you can really profile drivers and price them before they become your customer.

Theft of motor vehicles is still a risk; even with all this modern technology, thieves are still finding ways to steal in new and creative ways, and therefore a telematics solution could be an option for an expensive vehicle.

How have telematics changed the First Notification of Loss (FNOL) service?

Q A

That’s the one area where I don’t think we as an insurance market have really taken advantage. When telematics FNOL is done well, you are instantly in contact with the customer at the time of the accident, being able to put their mind to rest.

The big issue is that we’ve got a lot of structures and processes based on the majority of our claims, and whilst telematics is growing it’s still a relatively small proportion of what we do. What we need to be doing is building in connected device solutions that our suites can respond to, so we can take advantage of them rather than neglecting one of the biggest benefits.

When telematics FNOL is done well, you are instantly in contact with the customer at the time of the accident, being able to put their mind to rest

Q A

How else has the data gathered by telematics so far been used to improve underwriting and road safety?

We have now built up huge amounts of data and are able to use that to price more accurately, so we know to a very precise degree the risk of accidents road by road, mile by mile.

Whilst mobile phone based solutions weren’t initially great in terms of accuracy, they were absolutely brilliant at being able to regularly feed back to the customer. If you can give trip-by-trip assessments of how somebody has driven then you can genuinely improve their driving and therefore the safety of other road users.

Have telematics improved AXA’s ability to combat motor crime and insurance fraud?

Q A

Telematics put people off crime. If you intend to commit a crime, you’re not going to fit a highly sensitive tracking device to your vehicle; though strangely, we have had one or two, but we just think those people must have been a bit stupid.

There are some issues with people focusing on what data we have on them. The GDPR is coming in next year, and whether we’re in Europe or not, we need to support European-wide data protection regulations.

When looking at fraud investigations, we learned at an early stage that you don’t just ask about the incident. You ask about the day before and the build up to the incident, and that’s when the discrepancies show. With telematics we have that absolute wealth of data so we know precisely how they’ve been driving.

One of the issues with telematics today is that insurers all have different standards. If one of our customers has built up a good driving profile with a telematics solution, they can’t then go to Aviva and use the AXA data to ask for a discount. That’s great for us as it improves retention, but I can’t see that being good for the consumer generally. It does depend on the solutions and we still have a multitude of different telematics offerings, all of which have different features for and against them.

David Williams is Technical Director at AXA Insurance.

If you can instantly be aware of a claim, without any shadow of a doubt, you can massively control third party costs, and we’ve not done as much as we should in that regard.

January 2017

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Telematics FOCUS

Case Study Octo Telematics A

key feature of the present motor insurance market is the changing outlay on claims. While the number of accidents is said to decrease as a general long term trend, the actual expenditure on claims has been evolving differently in each country. According to Insurance Europe, total claims have grown almost 20% in the period between 2002 - 2010 across Europe.

A further example, which can shed some more light on this topic, involves one of the major European insurance companies (confidentiality clauses do not allow Octo to disclose the name).

In terms of claim costs, the variations can be attributed to 3 main factors; repair costs, personal injuries costs and fraud.

As for the latter, motor insurers have been reporting increased instances of fraud since 2010. In 2013, the average percentage of fraudulent claims was estimated at 3.7% in Slovakia and 1.6% in the UK, while in 2014 it was only 0.6% in Sweden and below 0.2% in the Netherlands and Norway. In Italy, the share of fraudulent claims was estimated at 14% but with clear regional differences: in the South of the country, it can be as high as 24%.

In the UK, according to the ABI, the value of fraudulent motor claims covered by insurers topped £835 million in 2014. They reveal that out of all fraudulent claims (130,000 in 2014), dishonest motor insurance claims were the most common and of the highest value: 67,000 claims (up 12% on 2013) valued at £835 million (up 3% on 2013). Fraud includes fraudulent claims, staged accidents, phantom passenger claims and underwriting frauds, i.e. nondisclosure of information or false disclosure in order to obtain a more favorable rate of insurance premium.

In the US, fraudulent auto insurance claims were estimated at $4.86.8 billion in 2007 by the Insurance Research Council. Questionable personal injury protection (PIP) claims involving staged accidents surged by 52% in 2009 and then 17% in 2010. For 2011, early estimates suggest an even larger increase. Today, 21% of bodilyinjury (BI) claims and 18% of PIP claims that were settled had the appearance of fraud and/or build-up. Build-up generally involves inflating otherwise legitimate claims. The majority of those claims involved chiropractic treatment, physical therapy, alternative medicine and pain clinics.

In the above case, Octo made the following year-on-year comparison and over a time span of three years: 2009/2010 and 2010/2011. In the first case, a reduction of claims frequency equal to 9.4% was observed. In the second case, this specific performance improvement reached 15.9% at the end of 2011.

Along with other PKIs, such results were the most visible outcome of a progressive adoption path, which started in 2008 (learning from data), moved then to an aggressive management policy in case of potential frauds, shifted into higher gear in 2010 thanks to the integration of crash data within the insurer’s IT system, and was concluded with a full training and know-how sharing within all the company’s key stakeholders (e.g. agents’ network, repair body shop).

A European-based perspective

Octo has been providing telematics services since early 2005, first in Italy and then in all the major European countries, with further expansion to the North American market as well (2011). As far as claims management is concerned, Octo helped its insurance partners attain the following main goals.

Two additional testimonials (UnipolSai Assicurazioni in Italy and Insure The Box in the UK) can provide some additional background context: “Processus et Peritus – Medicians congress” (May 2013) The speech of Ms. Giovanna Gigliotti (Chief of Claim department UnipolSai) highlighted two important results for the company due to telematics:

These results are based on the comparison of claims management during one year between two homogeneous groups (Italy), one managed in the old-fashioned way and the other managed with telematics data support.

January 2017

1. 10% reduction of average claim cost for the firsts 6 months of 2013 vs average cost in 2012 2. 1000 Euros as average saving for whiplash claims for telematics policies vs. traditional policies”.

Jonathan Hewett, Group CMO, Octo Telematics.

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