I was discussing telematics and other forms of “big data” with Peter Marotta, enterprise data administrator for Verisk Analytics, at the Insurance Accounting & Systems Association’s (IASA) annual conference June 3-6 in San Diego, when he pointed out an unusual position that the insurance industry is in today.

“The technology [around telematics] is well ahead of its utilization,” said Marotta.

In most cases insurers 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 carriers. Finding ways to bring some structure to the data is just one of the reasons insurers have yet to make a telematics breakthrough.

A breakthrough, however, 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.

NU recently wrote about State Farm Insurance and Ford Motor Co. collaborating on a new telematics program that brings together these two major players in the world of automobiles and Personal Auto insurance. Marotta believes it’s a step that needs to be taken for telematics to become an effective tool for insurers.

“The insurance companies and the automobile manufacturers need to create telematics standards,” he said. “Both sides need to work together.”

Not surprisingly, ACORD (Association for Cooperative Operations Research and Development) is working on those standards—and in a blog posted earlier this year, ACORD CEO Gregory Maciag calls for all sides to work together. Maciag cites the efforts being conducted in England to bring standards to telematics and points out that because the technology is still in its infancy in the U.S., car companies and insurers here will have the advantage of hashing out any potential conflicts early.

Another concern shared by Marotta and Maciag is that large insurers may establish proprietary standards for telematics data—and that could be a setback for the midtier market, which lacks the resources to develop the technology on its own.

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

None of us is going to lose any sleep over billion-dollar companies battling in court, but we are all reminded of past headaches the industry has endured because individual companies are reluctant to participate in establishing standards that the entire industry can share.

Every midtier insurer should be pushing for standards around telematics before they are forced to pay the price of being behind the curve: adverse selection of their Personal Auto products.

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Telematics Technology Ahead of Carrier Utilization&mdash;For Now

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