Smartphones have the ability to capture and transmit much of the same data of onboard devices installed in vehicles. Allstate—which began offering a smartphone option for its Drivewise usage-based insurance (UBI) program in February 2014—believes the devices present a viable option for UBI.
“After doing a lot of testing with our employee group, as well as customers, we are comfortable with where we are at and with the data we are receiving,” says Allstate spokesperson Justin Herndon.
However, across the U.S. insurance industry, smartphone use has generally been limited to driver-awareness services—such as parents monitoring children's driving behavior—rather than policy rating.
Progressive continues to look at ways to use smartphones in its UBI program, but has run up against several obstacles. “If we could give customers an option to use their phone to send us data, that would be easier for them, but it's actually technically pretty challenging for us,” says David Pratt, general manager of UBI at Progressive. “One of the variables in our discount calculation is how often you hit the brakes hard, and it's more difficult to get that data via phone versus the OBD device. We also need to be sure the data is accurate and relevant, such as distinguishing between when you're a passenger and driver.”
Smartphone data may also not correlate easily to the way U.S. insurers rate auto policies. “It's the car that is being insured, and it's the car that needs to be connected,” says Nino Tarantino, CEO of Octo Telematics North America. “The cellphone is connected to the driver. It can't tell you if someone different is driving the insured vehicle. You also lose a lot of data when you go to a non-OBD device.”
Part of that loss comes from the fact that there's no way to know if data is complete. “Customers can simply turn their phones off,” says Monique C Hesseling, partner in insurance consulting, Strategy Meets Action. “However, I do foresee an increase in telematics via mobile devices, particularly among the younger driver segment, because it's much cheaper for insurers than using a plug-in, black-box device.”
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