Blog

Accurate Policyholder Data: Just a Few of Clicks Away, But Still a Hot Potato

Joe McKendrick
Insurance Experts' Forum, April 29, 2014

Let's be frank. There is a lot of disenchantment with the way automobile premiums are being determined. There are now accusations swirling about new levels of alleged discrimination taking place, this time based on income, educational level and occupation. When the issue hits the pages of The New York Times, you know government regulation isn't far behind.

Assessing auto insurance risk based on factors such as education and marital status may or may not be fair, depending on many situations. But other factors impact the accuracy of risk assessments and premiums as well. For example, outdated rules engines tied to legacy applications may even skew and warp ratings, as I discussed in a post a couple of years back.

Big data may be coming to the rescue. There's more and more of a push to tie premiums to actual, documented driving habits, which is the most accurate form of risk assessment there is. And, as observed by Mario Rodriguez, director national technical compliance at Sedgwick, the ability to track and capture driving patterns for each individual is now attainable through event data recorders (EDR), the “black-box” recorders now put in every vehicle. EDRs, combined with telematics devices, provide a powerful and accurate documentation of driving habits, independent of any of the traditional lifestyle, economic and situational risk factors that have been part of auto insurance.

Rodriguez cites National Highway Traffic Safety Administration, which estimates that some 91 percent of cars on the road today have EDRs. However, insurers have been reluctant to tap into EDR data, he says. Right now, it's a hot potato, since, unlike telematics, it involves data collected without the vehicle owner's consent.

For one, there are legalistic questions about who owns that data. It could be the car owner, the auto manufacturer or even law enforcement.

“It’s kind of a tricky issue, as each automobile manufacturer has its own proprietary approach to EDR,” Rodriguez points out. He also notes that “there is currently a hodgepodge of legislation governing EDR — some states allow it, some don’t. In fact, out of privacy and other concerns, some states even have mandates that nullify use of EDR data.” So insurers have heretofore have been reluctant to touch it.

Rodriguez, for one, says it's time that EDR data is released and made available to the insurance industry for claims settlements. But it's going to take some internal industry collaboration, legwork and evangelizing. As he puts it: “As an industry, we need to encourage standardization of EDR technology and adoption of uniform state laws governing its use. We need to start more pilot programs and work to train our adjusters on how to maximize the data contained in EDRs. Insurers should include language in their policies granting them immediate access to the technology in the event of an accident. And, we need to encourage car manufacturers to do more to expand utilization of not just EDR technology, but other collision and accident avoidance tech. Let’s not just record data — let’s do more to prevent accidents.”

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments...

Already Registered?

If you have already registered to Insurance Networking News, please use the form below to login. When completed you will immeditely be directed to post a comment.

Forgot your password?

Not Registered?

You must be registered to post a comment. Click here to register.

Blog Archive

The Software-Defined Health Insurer: Radical But Realistic?

Can a tech startup digitally assemble the pieces of a comprehensive, employer-provided health plan?

Data Governance in Insurance Carriers

As the insurance industry moves into a more data-centric world, data governance becomes more critical for ensuring the data is consistent, reliable and usable for analysis.

Fear This

Just days before this Issue, which contains our security cover story, went to press, we got some interesting news: 1.2 billion unique usernames and passwords and 542 million email addresses were reportedly stolen from 420,000 websites, according to The New York Times. The websites ranged from Fortune 500 companies down to small online retailers.

Should You Back Up Enterprise Data to the Cloud?

Six questions that need to be asked before signing on with an outside service.

Modernizing Information Management

While better reporting and actuarial analysis help to support financial decisions, improved analytics and decision making greatly assist the rest of the organization.

Strategic Planning: Here and Now

Insurers’ annual strategic planning efforts can benefit from an infusion of tactical reality.

Advertisement

Advertisement