There are dozens of examples in both personal and commercial lines like boilers, furnaces and other machines outfitted with sensors, connectivity and Internet of Things attributes, but few are as SEO-friendly as driverless cars, so that's what we'll address here.
The one thing all of these examples share is that they create what we call "non-approximated data." If that catches on as a buzzword, remember that you heard it here first.
Determining risk
Today when you write a risk, you need to get their driver's score, the number of points the driver has, the vehicle type, and then you approximate the risk. Actuaries are good at doing this. They have years of experience and wonderful math. But when insurers have access to non-approximated data — data about the actual risk, the actual drivers, what they're doing and where they're actually going when they drive, such as from telematics devices — they have a much clearer picture of what they're insuring, what it should cost, and how profitable those drivers are likely to be. That's a model and a method that increasingly will be applied to other markets as well.
As driverless vehicles enter the world, there won't be drivers anymore. Companies will need to insure the manufacturers, and specifically their algorithms and sensors. That means a very large source of business for personal lines carriers is going to fade away, and maybe not slowly either. It could change so quickly that carriers will have both a crisis and an opportunity on their hands.
Using data to anticipate opportunities and threats
Large carriers, and some of the smaller ones too, are conducting a lot of research on various data uses. Many realize that they could soon be at a disadvantage. Some don't know commercial insurance as well as commercial lines carriers do — yet. But they understand the urgency. They also know this is an enormous opportunity for any carrier prepared for this massive influx of data, regardless of its source and location.
The point is that the technology today is that good. After an adjustment period, it's going to change the nature of risk, resulting in safer roads, and fewer accidents, injuries and fatalities. All of which is great for society, and for insurers prepared to seize that opportunity.
To do that, though, you need technology that will enable you to make these shifts. And you need to know where you stand and how you stack up against the competition.
Jeff Wargin (jeffrey.m.wargin@duckcreek.com) is vice president of product management – policy and platform for Duck Creek Technologies.
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