The use of telematics data in claims likely holds more value for your organization than the use of this data in underwriting. This assertion may not be capturing many headlines, but telematics integrated into the claims process represents a powerful proposition for insurers and consumers. And, this technology is inevitable. Here's why.
The pace of adoption for telematics in usage-based insurance (UBI) is nearing a tipping point. Experts forecast 60M-100M global UBI policies by 2020, which conservatively represents a growth rate of 60-70 percent per year. IHS Automotive predicts that 86 percent of new vehicles sold next year will have connectivity to the Internet. And, Progressive and Allstate have already accumulated well over 25 billion trip miles through their UBI programs. Given these figures, it's only natural to explore where else the driving data can be applied.
Driving data can transform claims. In fact, there are very few steps in the auto claims process that can't be positively impacted by telematics data. Consider your claims environment in the near future:
- First notice of loss (FNOL) moves from days to minutes or seconds
- Immediately after FNOL, critical services such as police, EMS, and towing can be coordinated if needed
- Vehicle repair vs. replace becomes a near-immediate, automated decision
- Injury causation and severity can be evaluated on the spot.
This is the tip of the iceberg, but it's enough to demonstrate the transformational potential of telematics in claims. Understanding the data will be your first step.
The data
Various types of data collection strategies exist. You can collect driving data from mobile devices (e.g., smart phones); after-market devices (plugged-in or hardwired), and from OEM connected car offerings. Each viable, but questions of data accuracy, precision and cost will need to be addressed by your organization, regardless of how you plan to use the information. Figure 1 offers a comparison of the general principles for each collection method.
It is important to distinguish between precise versus accurate data because precise data can be inaccurate and you can use accurate, but less precise data responsibly. It's the role of the solution provider to use the data correctly, regardless of the level of precision. That said there are two unknowns that need to play out as it relates to data precision. The first is data from the OEMs. Today, you can obtain crash data from the vehicle's event data recorder (i.e.," black box") that is very accurate and extremely precise data. The question is will the OEMs expose this detailed data through their solutions that are purposed for monitoring driving behaviors when an accident occurs? The other question is around mobile solutions. Today the data collected from mobile apps is less precise, but data precision is improving, and will continue to improve. This includes the work being done to improve crash detection.
Next, let's examine the type of data that can be collected that can transform claims. The aforementioned event data recorder technology classifies data collected as pre-impact data and crash data. Pre-impact data examples are vehicle speed, location, braking, and steering. Depending on the provider, data can be sampled in one-second increments or in fractions of a second. Unlike event data recorder technology, you also can be provided the date and time of the accident.
The graph in Figure 2 depicts a crash pulse, which is telling us how severe the accident was, as measured in milliseconds. This data is very accurate and precise and it gives us the vehicle's delta-V, or change in velocity over the period of time the impact event occurs. Delta-V is a measure of impact energy that has been used by accident reconstruction and impact biomechanics experts for decades. This data is very important in understanding the cause of injuries, as well as the cause of auto physical damage.
As it relates to injury, the data can not only tell you if there is an injury, but how severe it is. At Injury Sciences, which was acquired by CCC Information Services (CCC) in 2012, delta-V data has been used for more than 20 years to mitigate medical build-up and fraud in low-velocity impacts. The use of that data on applicable claims reduced the average severity of that build-up by about $3,000 per claim. This data, once combined with telematics data, will give insurers the ability to look at the same type of issues, not in just low-velocity collisions but also in moderate and very severe collisions.
CCC has also examined auto physical damage outcomes in the context of delta-V. With access to more than 170M claims-worth of data, large groupings of accidents with different impact configurations were studied and demonstrated relationships that will be transformative to claims processes. For example, as the energy in the impact (measured by delta V) goes up, the frequency of the repairability of the vehicle goes down. Similarly, the probability for a total loss goes up, just as you would expect. What's exciting about these relationships is that you can use them to develop very precise models that can help auto insurers make more informed and accurate claims decisions when they need to be made.
Practical applications for this data include determining if a vehicle is drivable immediately after an accident. Is the vehicle a total loss or is it repairable? If it's repairable, what is the most cost-effective method of inspection? If it's not repairable, where should it be towed? CCC's studies show that these kinds of decisions, made on a timelier basis can easily reduce cycle time by two days and conservatively generate over $175 of LAE benefit per claim.
Why telematics-enabled claims is inevitable
Let's assume I am in accident. I'm driving a Suburban, stop at an intersection, and then proceed to take a left-hand turn. Somebody blows through the stop sign and T-bones me. The telematics-based recoding of delta-V is 25 miles an hour. A delta-V of this magnitude for a side impact is a severe accident.
With telematics-based claim solutions, the Suburban contacts your FNOL team rather than me calling to report the accident. You learn I was just in an accident, my policy and coverage information is immediately displayed along with my contact information. And, based on visual indicators such as red for severe, yellow for moderate, and green for minor, you are informed of the severity of the impact. You know the probability and potential severity of injury.
My mobile phone rings. "Mr. Palmer, this is your insurance company, I can see that one of the vehicles you insure with us has been involved in an accident. How are you? It looks like a very severe accident." Because certain vehicles have indicators in the seats to signal an occupant in it, you know that somebody is in front passenger seat as well. "Was there anybody else in the car?" "Yes, my wife. She's hurt." Because you have the location data and are mapped to the nearest EMS provider, you say, "Understood. We've already notified the police. I'm now notifying the closest EMS provider." Before you get off the phone, you will likely be able to hear the sirens arriving.
With such critical assistance in a true emergency, how do you think I will feel about the experience with my insurance company? Gratitude and loyalty are two words that come to mind.
From the telematics data transmitted, you'll know my car isn't driveable so you can dispatch someone in your tow network and dispatch a rental as well, using the provider with the closest location to the accident. You can see more possibilities here.
Telematics is growing rapidly, and driving data is already flowing into insurance organizations. Utilizing many of the claims tools already in place, you will be able to integrate this data into your existing process. When you begin serving your policyholders at the level just illustrated, the high likelihood for policyholders to begin shopping for new insurance after an accident could become a thing of the past. And, the additional impact of telematics on claims in terms of more consistent and accurate results will reflect positively on your claim outcomes.
The information and opinions in this publication are for general information only, are subject to change and are not intended to provide specific recommendations for any individual or entity. Although information contained herein has been obtained from sources believed to be reliable, CCC does not guarantee its accuracy and it may be incomplete or condensed. CCC is not liable for any typographical errors, incorrect data and/or any actions taken in reliance on the information and opinions contained in this publication.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.