Data Driven Insurance Underwriting

Data Driven Insurance Underwriting
David M Walker
Data Management & Warehousing
http://datamgmt.com
26 November 2013
What happens when you add a little
black box to a car?
This small box can be fitted
to a car in about an hour
A basic model collects the
following info:
Longitude, Latitude &
Altitude
X, Y & Z Acceleration
Speed
Direction of travel
Distance travelled since last
report
Box Identifier
Date & Time
26 November 2013 http://datamgmt.com 2
On device collection of data in a Round
Robin Database
A Round Robin Database or Circular Buffer
records the data regularly (e.g. milliseconds)
After a time interval or a distance travelled an
aggregate report is sent to the server (Usage
Reports)
Usage reports can be separately buffered if there is
no data transmission signal
If a crash occurs the entire content of the buffer
is sent to the server (Crash Reports)
Sending Data Home
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Usage Reports
In town driving typically generates more
time limited reports
Short distances driven in slow traffic
Typically every 15 seconds
Motorway driving typically generates
more distance limited reports
Long Distances driven at high speed
Typically every 1 km
Trips are defined as ignition start to
ignition stop
Usage reports describe the driving
behaviour
Crash Reports
How was the driver driving
immediately prior to the crash?
Where did the impact come from?
X, Y & Z Acceleration determine point of impact
negative acceleration on the front you hit them
positive acceleration on the back they hit you
Crash reports are used to help determine
fault
Basic Data Model
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Data Volumes
88 290 Bytes Per Data Point
Depends on the type of Black Box
124 Data Points per Trip on average
81 Trips per Month per Vehicle
Retained over 5 years
~ 165 Mb per customer
~ 1 Tb per 7000 customers
~ 15 Tb for 100,000 customers
All the rest is insignificant
Policies, claims, reference data, etc. becomes
insignificant in comparison to trip data
Data Collected At Quote Time
Vehicle
Make, Model, Engine Size, Alarm,
Modifications, #Seats, Where
kept (Day & Night), Use (Social,
Domestic, Commuting, etc.),
Annual Mileage
Policy Holder & Other Drivers
Address, Age, Gender
,
Marital Status, #Children, Other Vehicles,
Employment Status, Occupation, Industry,
Residency, Previous Claims & Convictions, Licence
Type & Additional Qualifications, Medical Conditions
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Data Collected At Claim Time
Type of Incident
Location of Incident
Weather
Other Parties Involved
Types of Vehicles Involved
Injuries
Damage to vehicles
Damage to third parties and property
Police Involvement
Description of the incident
Photographs and Sketches
Data Collected about Geography
Commercial & Government Sources
Road Name, Road Type, Speed Restrictions
Average Speed by Road, by Day, by Day of
Week and by Time of Day
Points of Interest
Supermarkets, Petrol Stations, Car Parks,
Theme Parks, Sports Stadiums, etc.
Meteorological Information
Rainfall, Temperature, Sunrise/Sunset Times
Open Sources
Wikipedia
Google/Bing/Apple Maps
Data Collected from Social Media
Customer Likes the insurance company on
Facebook
Wow - just got a great
deal on my car insurance
Customer chats to their friends
Just had a bump in my car, going to try and get
them for whiplash too!
Yes people really are
that stupid!
Advanced Data Collection
More sensors in the little black box
Vehicle Interface Modules (VIMs)
Provide an interface between a vehicle's on-board
diagnostics link (e.g. OBD II) and the black box
Depending on the vehicle this provides access to
data such as oil/water/tyre pressures, time since
last service, car dashboard warning
lights that are on, ABS usage,
airbag deployment, was the
Bluetooth active, lights on/off,
windscreen wipers on/off etc.
A Note On Data Privacy
Data Protection & Privacy Laws
These vary by country so just how
much you can use of what you could
collect will also vary
You cant use all the data anyway
European Court of Justice banned
insurance companies from using
gender as a rating factor after 21st
December 2012
Opt-in/Opt-out data usages
It is also possible, with permission, to
resell individual and aggregate
information to third parties
Creating an Insurance Offering
Offerings are typically designed a lot like
Pay As You Go Mobile contracts
Fixed element covers the device cost,
administrative aspects, etc.
Usage (Risk) element price per km driven,
with different rates for different levels of
service
e.g. driving in the rush hour or the dark carries a
higher price than driving off-peak in daylight
Usage bundles First 500 km included
per month
Requires top-up once they are all used up
otherwise you are not insured to drive
normally auto debited from a credit card
Unexpected Consequences
Driver behaviour is modified but this may not
deliver the expected results
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New Business & Renewal Quotations
Year 1 Underwriting
New policy prices based on traditional (non-
telematics) underwriting scores
No renewals
Year 2+ Underwriting
New policy prices based on data about existing
customers and vehicles with similar profiles
Renewals based on the individual risk profile
(Dis)-Incentivising
Carrots
Bonus miles for driving within speed limits, in
daylight, off-peak, good weather, parking off-
road, etc.
Sticks
Increased cost per km for persistent
speeding, regular hard braking (detected from
accelerometer), etc.
Note: Penalising customers too hard will force
them to move away and have a reputational
impact
So what does the data show?
Driving Behaviours
Policy Compliance
Claim Assessment
First Responder
Theft & Fraud
Risk Profiling
Customer Behaviours
Driving Behaviours
Does a person driving follow speed limits?
Average speed as a percentage of the speed
limit by roadtype, user and between dates
Does the person regularly brake hard?
# of negative X-Accerations by 1000 miles driven
by roadtype, user and between dates
Does the person drive unduly long hours?
Number of trips longer than X hours
Number of minutes break between trips
Policy Compliance
Total number of miles driven
Is a vehicle registered for Social, Domestic &
Pleasure being used for commuting or business
Regularly driving between A and B in the morning
and between B and A in the evening
Location where the car is parked over night
Usually at a point near the policy holders address or
somewhere completely different
Taxi & Delivery Drivers
Dont buy a commercial policy but can be spotted by
their driving patters
Claim Assessment
When a claim is made the details can be
verified
Location of accident even have a look at it on
Google Maps
Point of collision and who hit whom
Weather, Amount of Light
Speed and G Forces at time of impact
Did the vehicle roll?
First Responder
When an accident occurs:
If it is severe enough try and contact the
customer
Contact emergency services if required
Arrange for your preferred recovery/repairers to
deal with the incident reducing the claim costs
Perception bonus My insurance company
really cares for me!
Theft & Fraud
Theft
Device is always tracking so if a vehicle is
reported stolen it can traced and recovery action
Fraud
Fraud rings may fake traffic accidents or stage
collisions to make false insurance or
exaggerated claims
Many of the details can now be validated
(location, weather, speed, collision, etc.)
Risk Profiling
What combination of attributes for both a
driver and a vehicle have the lowest total
claim value per 100,000 miles driven?
Are a larger number of small claims more
expensive than a smaller number of large
claims?
Statistical Cluster Analysis techniques to
determine high and low risk proposals
Customer Behaviour
Football Supporter
Regularly goes to home ground
Do they go to away matches too?
Business Traveller
Regularly leaves car at airport parking
School Run
To and from home to local school twice a day
Change of job
Changes location of daily commute parking

This information can (with permission) be sold to third parties
Marketing companies, Football clubs, etc.
These techniques are already being used by some mobile
companies
Security Services
Fact Of Life
Courts will order access to data if someone
is under suspicion
Anti-Terrorism, Organised Crime, etc.
Data will be used after an event to track
Where did they travel from
Who did they visit before the act
etc.
The Future
Pay As You Go Road Usage Pricing
Governments requiring cars to be fitted with
telematics and road usage data sent to them
Reduced Premiums & Higher Profits
If all cars have telematics then low risk
customers will not be used to subsidise high risk
customers some of this benefit is passed on to
the consumer by way of lower premium and
some is retained by the insurance company
An Observation
Some of the evidence from telematics is
either counter-intuitive or goes against what
the underwriters know is right
Getting business users to use the data and
adjust the way they rate risk is difficult
If you make changes to how risk is rated you
have to track the effect of the changes
Whos doing this in the UK ?
Have a play
InstaMapper GPS Tracker
http://www.insta-mapper.com
iPhone & Android App
Gives GPS but not accelerometer data
Other applications are available but this is
the one I used for the Proof of Concept work
THANK YOU
David M Walker
Contact Us
Website: http://www.datamgmt.com
Telephone: +44 (0) 118 321 5930
David Walker
E-Mail: davidw@datamgmt.com
Telephone: +44 (0) 7990 594 372
Skype: datamgmt
White Papers: http://scribd.com/davidmwalker
About Us
Data Management & Warehousing is a UK based consultancy that
has been delivering successful business intelligence and data
warehousing solutions since 1995.

Our consultants have worked with major corporations around the
world including the US, Europe, Africa and the Middle East.

We have worked in many industry sectors such as telcos,
manufacturing, retail, financial and transport. We provide
governance and project management as well as expertise in the
leading technologies.

In The Netherlands Data Management & Warehousing works in
partnership with DeltIQ Group.
Data Driven Insurance Underwriting
David M Walker
http://datamgmt.com
THANK YOU

Data Driven Insurance Underwriting

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