While discussing telematics and other forms of "big data" with Peter Marotta, enterprise data administrator for Verisk Analytics at last week's IASA conference, he pointed out an unusual position that the insurance industry is in today.

"The technology [around telematics] is well ahead of utilization," says Marotta.

In most cases—particularly for insurers—we end up waiting for technology to catch up to the needs of the industry, but that's not the case with telematics.

There's a simple explanation for why insurers have yet to embrace the technology: The amount of data that telematics systems collect is imposing for even the largest of insurance carriers. Finding ways to bring some structure to the data is just one of the reasons insurers have yet to make a telematics breakthrough.

But a breakthrough certainly is on the horizon. There are too many underwriting advantages to be gained by insurers through the use of telematics to give up on finding the right solution to this "big data" issue.

We recently ran an article about State Farm Insurance and the Ford Motor Co. collaborating on a new program that brings together these two major players in the world of automobiles and personal auto insurance. It's a step Marotta believes is the direction telematics needs to take to become an effective tool for insurers.

"The insurance companies and the automobile manufacturers need to create telematicsstandards," he says. "Both sides need to work together."

Not surprisingly, ACORD is working on thosestandards and in a blog posted earlier this year by Gregory Maciag, CEO of ACORD, he calls for all sides to work together. Maciag cited the efforts being conducted in England to bring standards to telematics and points out that because of the technology's infancy in the U.S., car companies and insurers can get a jump on solving long-term issues.

Another fear that both Marotta and Maciag expressed is that insurers may establish proprietarystandards for telematics data, which could be a setback, particularly for the midtier market that doesn't have the resources to develop the technology on its own.

Progressive is the recognized leader in telematics at this point and they are keeping a close eye on competitors using what they feel is proprietary technology. Most recently, Progressive filed patent-infringement lawsuits against The Hartford and State Farm.

None of us are going to lose any sleep over billion dollar companies battling in court, but we are all reminded of past headaches the industry has put up with because individual companies are reluctant to participate in establishingstandards that the entire industry can share.

Every mid-tier insurer should be pushing forstandards around telematics before they are forced to pay the ultimate price of being behind the curve with telematics: adverse selection of their personal auto products.

Special Reports /

Telematics Technology Ahead of Utilization—For Now

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