Andrew Tolve explains how smartphones could help make the insurance telematics model work
Of all the insurance telematics solutions to surface in the past three years, smartphones have been conspicuously absent from the party. This is partly because not all drivers own smartphones, and there’s little sense in making a telematics solution dependent on another solution that a large percentage of drivers lack.
But as smartphones start to saturate the market and as ongoing concerns about privacy and cost continue to stall the current batch of insurance telematics solutions, smartphones may emerge as a way to incentivize the insurance telematics model. “Smartphones open up many possibilities to make the model work,” says Hervé Carrillo, founder and director of ACT Concepts, a French start-up in the insurance telematics space. “It’s time to give this device serious attention.”
At the 2012 International Consumer Electronics Show in Las Vegas, Mobileye unveiled an aftermarket device called the Mobileye 5 Series that allows advanced driver assistance systems (ADAS) to connect directly to smartphones, so that drivers can receive real-time warnings from the systems hard at work under their hoods. (For more on ADAS, see Telematics and new V2V/V2X business models, Telematics and V2V: Costs versus benefits, and V2X telematics: Taking ADAS to the next level.)
Carrillo says that companies in the insurance telematics arena can follow suit. Connecting insurance telematics solutions to smartphones can provide transparency to drivers and a degree of control and real-time feedback. “The philosophy is very important,” says Carrillo. “Integrating smartphones into insurance telematics can increase adoption, yes, but it also can help to alter the driving behavior before the accident, and that needs to be our real objective.”
The smartphone incentive
Phones have very little to do with the appeal of smartphones these days. Sure, being able to dial a friend on a smartphone is nice, but it’s the apps on the screen and the functionality that these apps provide that offers the real allure. Carrillo says that insurance telematics models should tap into this synergy between phone and function. For starters, if insurers and providers pursue the right course, customers could download an app onto their smartphones and then download a specific offer/plugin from their insurer’s website. (For more on apps, see see Telematics: What’s next for apps and services, part I, Telematics: What’s next for apps and services, part II and Will ‘freemium’ work for telematics apps?)
This plug-in would enable them to test an insurance telematics solution before they commit to an additional technology in their cars. “The main interest is that you can test before subscribing,” Carrillo says. “Try a free app, see if you like the system and if you want to install the permanent technology.”
Once drivers subscribe, smartphones can add further value by illuminating what drivers do well and not so well. A smartphone interface, for instance, can show CO2 emissions, road safety participation, and fuel consumption, plus some of the more basic metrics that determine a driver’s premium. “The personal incentive to save money is very important,” says Carrillo, “but smartphones can also help tap into a broader social incentive.”
Integrating smartphones into insurance telematics solutions can provide a kickstart to the industry, Carrillo believes, but that alone won’t address the entirety of the issue. After all, much of the difficulty in finding traction for insurance telematics solutions, Carrillo posits, is that users continue to be uncomfortable with the idea of a black box that impinges upon their personal freedoms. This is more of a concern in some markets than others. In France, where personal liberties have always been a cause célèbre, it’s a big deal.
Carrillo and ACT Concepts attempt to address the privacy issue through the creative use of algorithms. With their solution “e-bonus”, smarpthones receive the GPS location and roadmap, then check the type of road and speed, and immediately without storing the raw elements compute a risk profile for insurers. “All the raw elements are destroyed in the smartphone,” says Carrillo. “There is no information even for you [the driver] to retrieve.”
To further emphasize the importance of choice, e-bonus allows drivers to choose whether they want the software engaged in the first place. Here’s the catch, though: The insurer’s premium is based both upon the risk factor, as calculated by the algorithm in the software, and the rate of use, as calculated by an “authentication model” that keeps track of when the ignition is on or off, thus allowing the insurer to calculate what percentage of the time the driver uses software when he or she is driving. “I am convinced if you want to ban something or require it absolutely, it’s not a good solution,” Carrillo says. “You must offer a choice.”
A safety liability?
One of the primary draws to insurance telematics is that insurers can more effectively assess and mitigate risk. It’s worth questioning, therefore, if intertwining smartphones, which studies have shown to be unsafe to use in cars, with insurance telematics solutions is a prudent idea. Carrillo says the question is warranted but argues that using smartphones to incentivize insurance telematics will not be a deterrent to insurers or a safety risk to drivers.
For one, some insurers care a great deal about smartphone use in vehicles and others don’t care at all. More importantly, smartphone integration with insurance telematics can actually decrease phone use in the car, he argues. With a solution like e-bonus, insurers can set up which risk variables they’d like to factor into the algorithm’s calculations, and phone use in the vehicle is one of those variables. Engaging the e-bonus software doesn’t count as “use,” whereas gabbing on the phone does.
“If the time you spend on the phone is very short, it will have virtually no impact on the rate of use,” Carrillo says, “and that encourages you to further avoid using the phone because you get a better premium as a result.”
Andrew Tolve is a regular contributor to TU.
For more on insurance telematics, see Insurance telematics in the US: Ready to grow?, Telematics and UBI: The regulatory opportunities, and Consumers and UBI: The power of value-added services.
For more all the latest telematics trends, visit Insurance Telematics Europe 2012 on May 9-10 in London, Content & Apps for Automotive 2012 on April 18-19 in Germany and Telematics Detroit 2012 on June 6-7.
For exclusive telematics business analysis and insight, check out TU’s reports on In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.