Celent Says

Does Insurance Need a Big Brother?

Craig Beattie
Insurance Experts' Forum, August 11, 2010

I happened to come across this article today about Pennsylvania state possibly using of roadside cameras, license plate recognition software and an insurance database to automatically fine vehicles on the road without insurance.

In the UK, this type of technology is already in heavy use. Number plate recognition cameras and the Motor Insurance Database or MID fulfil this purpose. The UK’s Motor Insurers Bureau quoting figures of over 500 uninsured vehicles seized by the police a day through the use of the MID. It is worth noting the MID is not used to automatically fine individuals in the UK at present. Police are automatically alerted to uninsured cars by an in-car camera, and can phone an insurance company to verify a customers insurance before seizing the vehicle.

In addition, the City of London gains significant revenue from charging for car access to the city. The toll is called The Congestion Charge, and uses number plate recognition technology to monitor and enforce the fee. Similar deployments have been made in other European cities to enforce various road laws, with Celent’s very own Karen Monks observing one in action in Florence, Italy.

So in this time of economic uncertainty, where various U.S. states are looking for cost savings and revenue streams—should insurance align itself with the Big Brother approaches to monitoring drivers? The number of uninsured drivers on the road has always been a significant problem, and with household budgets under pressure the problem will increase. Dealing with this issue comes at a significant price though.

The cost to the insurance industry of setting up such a system is considerable, especially one that can be reliable enough to automatically fine customers. Insurers not able to update the central database in a timely manner risk having their customers fined, or if the UK method is adopted, stopped by the police while their cover status is checked over the phone. Once again timely data integration will have a significant impact on customer satisfaction.

Whilst the insurance industry will resist the costs involved, and customer advocacy and privacy groups will lobby against such moves, it seems inevitable that automatic checking of vehicles status using license plates will eventually become a reality in most developed countries, if it is not already in place.

This blog has been reprinted with permission from Celent. Craig Beattie is an analyst in Celent's insurance practice.

Readers are encouraged to respond to Craig using the “Add Your Comments” box below. He also can be reached at cbeattie@celent.com.

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

Comments (1)

Having been involved in the development of the UK MID I have no doubts as to the benefits that it brings to insurers, honest customers and society in general.

With increased confidence in the accuracy of MID the police now frequently seize the vehicle without making further checks.

As is the case almost everywhere else insurance against certain auto insurance liabilities is mandatory in the UK and this includes unlimited liability for injury or death. The UK's Motor Insurers' Bureau is required to deal with these compulsory liability claims where the at-fault driver is either uninsured or untraced and the cost of these claims is passed on to all UK motor insurers via an annual levy. Inevitably this cost is then passed on to honest policyholders through the premiums they pay.

There is also strong evidence to suggest that there is a strong correlation between uninsured driving and other criminal activity and it is not unusual for uninsured drivers to be also unlicensed or disqualified from driving.

There are well developed plans in the UK to introduce "Compulsary Insurance Enforcement" - a process that will require the database of insured vehicles to be checked against a database of taxed vehicles and where the vehicle appears to be taxed but not insured a warning notice will be sent to the registered keeper. This will enable a larger pool of vehicles to be checked than is possible solely through the use of cameras.

Posted by: Jack B | August 13, 2010 4:24 PM

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