The Teaser Behind Telematics
Insurance Experts' Forum, March 15, 2012
Imagine risk managers overseeing a world in which every time a driver gets behind the wheel, they dock their smartphone on the vehicle’s dashboard, enabling both data-tracking processes necessary for precise underwriting and a window to driver distraction equally challenging to the risk management process?
Earlier this week, an estimate out of the U.K. research firm Juniper declared that, by 2016, “92 million vehicles will feature technology to integrate smartphones into motor vehicles.” This settles a debate at the core of telematics as to where devices enabling the proliferation of driver monitoring would come from. Smartphones are the obvious choice; they leverage technology already in consumers’ pockets and streamline data collection by giving insurers the opportunity to build the capability into a pre-existing app network.
But with that, auto insurers and risk managers see conflicting fronts collide.
Last December, the National Transportation Safety Board called for a nationwide ban of cellphone use while behind the wheel, “a prohibition that would include certain applications of hands-free technology becoming more common in new cars.” Insurers agreed, offering PR materials to assist in the fight against this new temptation. Last month, the federal government responded when Transportation Secretary Ray LaHood, citing at least 3,092 distracted driving deaths in 2010, proposed voluntary steps for automakers to disable in-vehicle electronic devices that the driver could use when a car is moving.
Juniper’s recent study suggests the opposite may be occurring; smartphones may soon be more ubiquitous than ever in a driver’s space. And insurers may be the ones forced to answer for this.
Given the prevalence of distracted driving—particularly among individuals in their early twenties—in the face of state-wide bans as well as parent (and even insurer) disapproval, it seems impossible to justify adapting car production to further integrate smartphone use into the act of driving. Unless telematics pays off, that is.
There are a couple of grey areas that could mitigate the risk conundrum that the smartphone/telematics pairing and distracted driving present. What if plugging your smartphone into the car—thus reaping the benefits of telematics—automatically disabled all social and Internet capabilities? That would eliminate all risk involved, but consumers certainly wouldn’t appreciate that type of outside control and influence. Perhaps, as a compromise, telematics will inherently provide an effective enough solution to appease both sides; if the technology is able to monitor performance and driver attentiveness, punishment for distracted driving via rate hikes could suffice. For the sake of the industry’s image, I hope it does.
As the public’s cry for the removal of electronic devices from motor vehicles and insurers’/automakers’ trajectory of integrating smartphones into the driving experience polarize further, somebody will need to answer to the former’s demands. For while telematics has carried virtuous intentions thus far—incentivizing safe practices behind the wheel with cheaper rates—the use of smartphones would suddenly put auto insurers in a precarious position: belying the vilification (partially their own doing) of distracted driving for an unproven greater good. And for an industry perpetually attempting to curry its way into public favor, nobody is going to give it the benefit of a doubt.
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