Wednesday, February 10, 2016

Ruminating on Usage based Insurance

Many Auto Insurance firms have started launching usage-based insurance (UBI) products - i.e. based on how much you drive (miles) and how you drive. These are called as PAYD (Pay as you drive) and PHYD (Pay how you drive) respectively.

Insurance firms typically ask their members to plug-in an OBD device onto their vehicles. The OBD device then syncs the data wirelessly to the backend platforms of the insurance firm.

Allstate's Drivewise program is an example of this. It was enlightening to know the various parameters that are captured by the device and transmitted back to the servers. The full list of parameters is available here - https://www.allstate.com/landingpages/drivewisedevice.aspx

Some of the parameters are:
  • GPS trail
  • VIN and Odometer readings
  • Hard Braking Events
  • High Speed Events
  • Acceleration Events
  • Vehicle Error Codes
  • A comprehensive trip report - seconds in acceleration, seconds in deceleration, miles driven in each speed band, constant speed miles, varying speed miles, etc. 
With the help of these parameters, an insurance firm can assign a 'Safe Driver' score for all their members and reward members for safe driving. There was another interesting parameter that could indicate if hypermiling took place :) 
Besides the OBD device, auto insurance firms need to invest in creating a scalable cloud platform to process this vast amount of OBD data. Technologies such as Big Data Analytics, CEP, scalable messaging and event propagation engines, next best action modules are integrated together to build such a scalable and modular UBI platform.