An important matter for insurance companies is to figure out how to make it more difficult for drivers to report a fraudulent claim and reward people for good (driving) behavior at the same time.
An increasing number of drivers is opting to install black box technology, known as telematics. Telematics in cars, or so called ‘pay-how-you-drive’ or ‘pay-as-you-drive’ insurance, uses real-time data to monitor driving behavior and calculate the premium accordingly. This requires a box with software and sensors to be installed in a person’s vehicle, and software to process the data. The sensor technology registers location, speed, acceleration and the G-forces that impact the car when swerving or turning corners. This provides the insurance company with insights such as braking and accelerating behavior of the insured and the actual and average driving speeds.
Detecting fraud and high risks
Insurers benefit as they are able to respond faster to customer claims by using the accident data provided by telematics-equipped vehicles. This results in increased customer satisfaction and retention. It also provides additional opportunities to reduce investigation costs and avoid fraud.
More importantly, based on the data provided by telematics-equipped vehicles, insurers are in a better position to assess risk. The data insights allow insurers to offer ‘pay-how-you-drive’ insurance models, rewarding customers in terms of lower premiums for better and safe driving. Improved insurance telematics, where data on a driver’s behavior is recorded on a second by second basis allows insurers to identify many more discrete behaviors. This makes insurers able to assess with far greater accuracy whether the facts presented to them are accurate or not. For example:
- Was the driver exceeding the specific road’s speed limit?
- Did the incident occur where it is claimed it did?
- Was there sufficient braking?
- Was the driving behavior of the entire journey uncharacteristic compared to recent history, suggesting either a different driver, or an impairment such as intoxication?
By analyzing the deeper data, insurers can immediately discredit claims that simply do not stack up.
A stunning example
Telematics insurance provider Insure the Box has used data collected from the telematics of cars in an insurance fraud case valued at £500,000. The case is one of the first of its kind. Insure the Box used the data collected from the black boxes installed in their policyholder’s cars to disprove 31 claims involving seven accidents over five months. The data was used in court to prove the actual location, time and severity of accidents. In one instance, a claim was made regarding an accident by two people who claimed they were strangers from one another. Black box data showed that one of the cars involved had been parked for 20 minutes just outside the address of a business owned by the other person, on the same day the accident occurred.
Drawback: manipulation of telematics data
On the other hand, new forms of manipulation arise with this emerging technology. An important question that insurance companies should ask themselves is: are telematics boxes really reliable at this point? The Royal Dutch Touring Club ANWB states that insurers are getting prepared for monkey business. Driving behavior seems to be easily manipulated when it comes to the current telematics boxes. Several anonymous people stepped forward in discussions online, claiming that they found ways to manipulate the data by simply connecting external tools. However, the ANWB claims that this is easier said than done, since the company has hacked its own telematics system for testing purposes. Simulating driving data is possible, but sending this data to the database and make it look like actual data based on driving behavior is not possible. Various security protocols prevent simulation, according to the company.
Although telematics is emerging rapidly and is opening many doors, insurers must stay alert while this technology is still subject to development. At the end of the day, insurance telematics will be a way to reward behavior. It is up to the insurers to make sure that people get rewarded for good driving, not for manipulation.