On-demand auto telematics and the permissible use of data
Discover how data exchanges and some regulatory clarity can further bolster auto telematics.
Insurance carriers have long used multiple standard rating variables when producing an auto insurance quote. However, despite the fact that telematics and usage-based insurance (UBI) have been around for some time, connected car data has not been easily accessible as a rating variable until recently. Instead, telematics data has historically been collected within insurance carrier-led programs through apps and other devices and the data has not typically been incorporated until later in a carrier’s workflow.
Today, data exchanges are taking promises of the past to the next level, with driving behavior data now available for consumers at the point of new business. By applying a regulatory lens to the data, consumers get the ability to enhance their insurance experience and loyalty through driving data that is their own.
The power of a telematics exchange
It’s important to note that insurer-led telematics programs have seen considerable success and there are many notable programs in the market today. However, when looking at the sheer size of today’s insurance telematics ecosystem and the number of players involved on both the insurance carrier and OEM side, gaps can develop and widen over time as these interconnected industries formulate their own data repositories. The complexity is real. Getting data from one entity to another or many others in a secure, compliant manner is not meant for the faint of heart nor designed to be executed by a “fly by night” company.
We refer to this complexity as the “many-to-many” challenge and an opportunity where data providers can help with their inclusive telematics exchanges.
We believe this complexity demands a neutral space. One where driving behavior data, along with consented consumer data, can be ingested in large quantities and normalized to produce actionable data that is ready to be packaged and leveraged in an insurer’s workflow as early as the point of quote for new business and point of renewal for current insureds. Another compelling point about the potential of such an exchange is data portability and consumer empowerment.
Transparency through data regulation
When data changes from vehicle-based to consumer-based and is portable for use at the consumer’s discretion, it prompts the necessary consent measures associated with the Fair Credit Reporting Act (FCRA), a federal law designed to promote accuracy, fairness and permissible use of information contained in the files of Consumer Reporting Agencies (CRAs). Companies like ours are considered CRAs, and therefore maintain certain responsibilities that apply to consumer driving behavior information managed within our exchange and delivered through applicable solutions. Thus, we have taken the approach that the same standards that apply to existing standard rating variables also apply to telematics.
Why take this approach/? To fully realize connected car data as a rating variable, you must also clear the same level of FCRA scrutiny. If an individual behind the wheel is operating the vehicle, we are not talking about the car anymore — we are talking about the consumer’s driving behavior. This is information about the consumer and not just information about the vehicle itself like engine type, make/model, trim level, MSRP, available safety features, etc. Telematics data cannot be generated unless a consumer is behind the wheel driving, and this is information related to how a consumer behaves while driving.
Telematics data is used to examine actual driving behavior to demonstrate (and validate) a user risk profile and, in essence, help an insurer decide whether a consumer exhibits good driving behavior.
That associated behavior information captures information about how the consumer drives, such as speed, trip duration, instances of harsh braking, or acceleration, and goes way beyond information about the vehicle.
This framework has been central to how we build platforms that deliver telematics data directly into workflows because this approach requires the same level of data governance — disclosable, disputable and correctable — as tenants for consumer transparency and trust.
Putting it all together
Needless to say, a comprehensive telematics program, when coupled with a UBI offering, requires a fair amount of heavy lifting on the backend to ensure algorithms are sound and data is accurate. This is critical on the carrier side to deliver an accurate quote and on the consumer side to ensure the data can be requested, accessed and corrected.
Insurers also have the ultimate goal of a better understanding of driving behavior and having the ability to provide a more complete picture of the individual in order for better risk assessment and pricing to follow suit. Similarly, the opportunity a telematics exchange creates for consumers is the ability to enhance their experience, which in turn builds a stronger relationship.
Leveraging consumer-driven telematics exchange data is not as daunting as it may have once seemed. Connected car data is real, and it serves insurers’ goals of better risk assessment and pricing. For both novice and experienced insurers in the telematics game, this means more data is now available upfront without a collection period. The data can be easily integrated into existing workflows and rating plans. So, rather than continuing to wait and asking the question as to “why telematics,” it may be more appropriate to conclude with “why not telematics?”
John Chalfant serves as senior product manager, U.S. Connected Car for LexisNexis Risk Solutions. In this role, John is responsible for product development and, in particular, for bringing innovative telematics solutions to market like Telematics OnDemand. He is also responsible for eliciting customer feedback, monitoring industry trends and managing vendor relationships to the benefit of LexisNexis Risk Solutions customers. John obtained a bachelor’s degree in science from Northern Michigan University and a juris doctor degree from Western Michigan University.
Opinions expressed here are the author’s own.
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