Telemetry Data: What Information Works Best?

Direct measurement of driving behavior, the heart of usage-based insurance (UBI), is the best way to match risk to premium. Insurers offer insurance discounts to safe drivers via UBI in order to acquire and retain the best risks. As a result, safer driving is promoted among these customers, which can amount to savings for organizations insuring drivers.

UBI is among the first attempts by insurers to adopt state-of-the-art technology for the underwriting process. Insurance companies and other service providers have struggled with some essential questions including those about the kind, resolution, frequency, and duration of data to collect, as well as what sensors to use. Indeed, many companies underwent independent efforts to establish data collection methodologies, generally resulting in a lack of any industry standard data “dictionary” or shared methodology for UBI. Still, it is possible to identify common approaches to collecting UBI data and how they are likely to evolve in the future.

Since the initial trials of UBI, the three cost factors—hardware, data, and analytics—have been the primary considerations as to how and what data elements each company collects. And even though prices of all three generally continue to decrease, the typical cost of setting up a full UBI program with filed predictive models remains significant. In the absence of industry-wide standards, it can be difficult to outline the breadth of the types of data collected. Even so, the following list covers most of the UBI data types found in the auto insurance market:

Verified mileage: This most basic mean of UBI is based on the well-validated assumption that more driving means more exposure to risk. Still, the advantage of verified mileage over declared mileage alone usually doesn’t justify a UBI operation for many companies.

Trip timing: A small advancement over verified mileage is trip timing. This goes beyond the pure mileage factor to estimate risk by studying when a driver is on the road, on the premise that some time slots tend to be riskier than others (Friday night, for example, with associated risk characteristics such as fatigue or drunk driving).

Driving events: Basic, yet powerful, behavioral aspects of driving are measured through collection of driving event data, mostly braking, accelerating, and turning. Sometimes absolute speeding events (exceeding 80 mph) and relative speeding events over the posted speed limit are recorded. Note, however, that onboard telematics units have relatively limited accuracy in collecting such data.

Full data log: As dongles came to market, they introduced improved collection capabilities, such as advanced GPS modules, CPU, accelerometers, OBDII, and large storage. With the falling cost of mobile data, companies started collecting full data logs and compressed them on dongles. Full data logs may provide endless analytics opportunities.

Smartphone data: The first technology to break the cost paradigm centering on device, data, and analytics is that operating from smartphones. Smartphones are also smart telematics devices owned by many, offering great collection and storage capabilities and data transfer at practically no additional cost. Unfortunately, smartphone data introduces many analytic challenges, including not knowing whether an insured is a driver or a passenger, whether the phone is turned off, and whether a driver operates an insured car.

What should we expect in the future? Against the background of rapidly changing technology and growing analytic complexity, future UBI is likely to rely on some of the following data elements:

Mobile data: As mobile apps become more sophisticated and reliable and as phone sensors become more accurate, more insurers are likely to use data obtained from mobile apps as a low-cost solution.

OEM data: Connected cars are growing in number (Gartner forecasts that by 2020, some 250 million cars will be connected). Data sets collected by connected cars aren’t as rich as those collected by dongles and provide more basic attributes (such as verified mileage, trip timing, and driving events). Nevertheless, they allow insurers to consume data more easily through data exchanges, where original equipment manufacturers (OEMs) take responsibility for the data collection process. Clearly, OEM capabilities will probably become even more advanced as manufacturers see more value from their investment.
Distribution of projected connected cars (source Business Insider)

Advanced Driver Assistance Systems (ADAS) data: ADAS can provide driving alerts and override driver inputs in certain situations. To date, these devices haven’t become part of the UBI ecosystem but can potentially contribute tremendous value to analytics for driving behavior and may play a significant role in the future.

A final question about autonomous cars: Will they render UBI obsolete? Probably not, and for two reasons. First, penetration of autonomous cars and shared vehicles may well be slow and gradual. Second, many events currently measured by UBI will probably remain important when autonomous driving is used (for example, time and destination of journeys). UBI is likely here to stay.

Lessons from Distracted Driving Awareness Month

June is Distracted Driving Awareness Month, and while it is quickly drawing to a close, the message remains: Distracted driving is escalating, with 25% more vehicle accidents resulting from drivers talking or texting on cellphones. More cars on the road, especially during summer months, also translates to more accidents.

Organizations with fleets should take note as motor vehicle crashes are the number-one cause of work-related deaths, accounting for 24% of all fatal occupational injuries, according to the National Safety Council (NSC). On-the-job crashes are also costly, with employers sustaining costs of more than $24,500 per property damage crash and $150,000 per injury crash.

Zurich sums up NSC statistics:
Employers can and are being held liable for damages resulting from employee accidents. “We might expect an employer to be held liable for a crash involving a commercial driver’s license holder who was talking on a cell phone with dispatch about a work-related run at the time of an incident—especially if the employer had processes or a workplace culture that made drivers feel compelled to use cell phones while driving,” the NSC said.

The lines believed to exist between employment-related and personal or private life get blurred in some cases involving:

  • Cell phones owned by employees as well as employer-provided equipment
  • Vehicles that were employee-owned as well as employer-owned or leased
  • Situations where employees were driving during non-working hours or were engaged in personal phone calls

To protect themselves and their employees, the NSC recommended that organizations implement and enforce a total ban policy.

“The best practice is to prohibit all employees from using any cell phone device while driving in any vehicle during work hours or for work-related purposes. Regarding off-the-job hours, precedent has been set by lawsuits. Thus employers may want to extend their policies to cover off-the-job use of company-provided wireless devices, use of personally-owned devices that are reimbursed by the company, and use of devices in company-provided vehicles. All work-related cell phone use while driving should be banned 24/7,” the NSA advised.

Companies should also pay attention to other common distractions that can lead to accidents, Zurich adds:

Implementing a Safety Culture for Company Drivers

Organizations with a safety policy in place for drivers of company vehicles may believe they are protected from liability in case of an accident. What they may not realize, however, is their defense could hinge on documentation of steps they have taken to ensure that the policy is being followed by employees, according to the study, Creating a Safety Culture: Moving from politics to habits, by SambaSafety.

The study found that, regardless of the policy in place, “simply saying that you didn’t know about poor driving behavior will no longer cut it – not when people’s lives and companies’ well-being are at stake. With the data readily available today, the courts are sure to ask how you didn’t know.”

To implement a successful program, it is important for employees to understand that the company’s policies must be followed by employees at all levels. “If someone in senior management breaks the rules and suffers no aftereffect, what’s the motivation for others to keep things in line?” the study asks.

Additionally, safety policies are not limited to employees whose primary responsibility is driving, or to those who drive company-owned or leased vehicles. According to the study:

Employee-owned or rented vehicles that are used for work-related journeys also must be part of the equation. To decrease liability (in addition to improving safety), policies should clearly state this fact and affirm that the same safe behavior is expected of every driver in the organization – on and off the job. That behavior might include non-distracted driving, for example, or even properly maintaining a personal vehicle used for company business to ensure safety and a positive refection of the organization.

Employees need to know that their employer can be held responsible for anything that happens while employees are conducting company business. Organizations also need to see that reimbursed drivers have adequate insurance, as well as administering signed driver agreements, providing uniform driver training – and ensuring that all drivers’ behavior and records are continuously monitored.

To move into a safety culture, SambaSafety advises organizations to keep their program in line with company principles, values and brand. Also important is working with the company’s existing culture:

Employees in a high-energy, competitive environment, for example, may enjoy contests between regions vying for the safest driving records. In a top-down culture, on the other hand, employees might respond best to regular tips and reminders from respected senior leaders.

In any case, clear communication can keep drivers from feeling micromanaged or worrying about their privacy and personal information. It can also mean fewer accidents and a higher level of safety for employees.

Fewer Sleepless Nights for Compliance Executives

Improved compliance programs, sufficient resources and board access have meant fewer concerns about personal liability for compliance executives, according to a study by DLA Piper.

In its 2017 Global Compliance & Risk Report, DLA Piper found that 67% of chief compliance officers surveyed said they were at least somewhat concerned about their personal liability and that of their CEOs, which was down from 81% in 2016. And 71% said they made changes to their compliance programs based on recent regulatory events, up from just 21% a year earlier. The study found that globally the compliance function is becoming more independent and prominent in large organizations.

There still remains room for improvement, however, most notably in compliance’s relationship with boards of directors. Directors, surveyed for the first time, were more uneasy, with 82% expressing at least some concern about personal liability. “This is likely related to other findings that show lingering kinks in communications channels and a persistent lack of training for directors. Together, these findings indicate that the relationship between the compliance function and boards needs work—despite efforts taken by organizations to upgrade their compliance program,” DLA Piper said.

In 2016, 77% of compliance executives said they had sufficient resources, clout and board access to support their ability to effectively perform their jobs. This year the number rose to 84% who said they felt that way. The improvement is possibly a reflection of the increased percentage of respondents who had the resources to make changes to their compliance program, compared to 2016, according to the survey.

While more respondents said they are increasingly able to affect change, obtain the resources they need and access senior leadership, however, a larger number said their budget was not high enough to accomplish their goals, from 28% in 2016 to 38%.

Boards had a different view, with 53% of directors agreeing strongly that their compliance group had sufficient resources, clout and board access. This was compared to just 29% of CCOs, which could indicate that CCOs are not effectively communicating their needs, the company said.

Of concern was that many directors appear to be receiving inadequate reporting and training on compliance matters. About a quarter of both CCOs and board members said the compliance function at their organization reports to the board less than once per quarter.

Of training, the report said that in light of a perceived heightened liability exposure for directors, it is puzzling that 44% of director respondents said they hadn’t received any training on compliance issues. Given evolving compliance standards and regulations—such as new Securities and Exchange Commission guidance on conflict minerals and updated DOJ guidance on corporate fraud—it’s arguable that training is more important than ever. Failure to engage in training could amount to a breach of fiduciary duty.

Almost half of respondents, 46%, identified monitoring as the weakest part of their compliance program. Monitoring, however, is particularly important in managing third-party risk, as regulators remain focused on violations related to third parties and as companies struggle to manage sprawling global organizations, DLA Piper said.

Top tools companies use to rate their compliance program: