Driving fairer prices for car insurance
We felt that SAS shared our common vision for IoT
improvement in insures' combined ratio, as telematics boosts profitability
Car insurers often have scant details available to help them calculate premiums. Octo Telematics set out to help insurers identify the safest drivers and reward them with cheaper deals.
Calculating insurance premiums is a challenging task for insurers, which often have limited information upon which to base their risk assessments. The time a driver has held their licence and the type of car have never been reliable indicators of safety; and reports insurers receive about accidents are subjective and may be written some time after the event.
Understanding the challenges facing the insurance industry, Octo Telematics wanted to provide a solution that would give insurers more information about their policyholders. By monitoring drivers’ real-life performance in real time, Octo would be able to give insurers unprecedented insight into how their customers actually drive day-to-day. This new data could empower insurers to make fairer pricing decisions and offer better deals to the safest drivers.
We felt that SAS shared our common vision for IoT, and from our analysis clearly had the best toolset that had already become the standard among our insurer clients. Jonathan Hewett CMO Octo Telematics
Shifting analytics into gear
To capture this valuable insight, Octo designed a telematics solution that gathers data on vehicle movements from a ‘black box’ placed in the driver’s car. The black box monitors speed, cornering, acceleration, deceleration and more, gathering granular data about how each driver behaves on the road in real-life conditions.
To analyse the black-box data and deliver tangible insight to insurers, Octo chose to deploy SAS Visual Analytics. Jonathan Hewett, CMO, Octo Telematics, explains: “We felt that SAS shared our common vision for IoT, and from our analysis clearly had the best toolset that had already become the standard among our insurer clients. It made sense for us to discuss how our dynamic dataset, algorithms and approach to analytics could work hand in glove with SAS tools.”
Octo Telematics – Facts & Figures
faster claims processing
billion miles of driving data
Up to 30%
discount on car insurance for safe drivers
Looking under the bonnet to reveal insights
Octo uses the insights from SAS Visual Analytics to provide insurers with an individually calculated risk score for every driver – and some of the results may surprise you.
For example, BMW drivers are generally considered higher risk drivers overall, but Octo’s data places eight percent of BMW drivers into the lowest risk category, indicating that they are very safe drivers who deserve lower premiums. By contrast, Smart car drivers display a lower risk profile overall, but only two percent of smart car drivers fall into the lowest risk category. Similarly, it is widely accepted that younger drivers lack experience and cause more car accidents, but Octo’s data shows that 26 percent of young drivers have a low risk score.
“Driving style is unique to each individual, so it doesn’t make sense to assess risk solely on the behaviour of other people with the same amount of driving experience or who own the same type of vehicle,” explains Jonathan Hewett. “Octo allows insurers to accurately determine risk for each individual, make much better-informed pricing decisions, and offer discounts and loyalty incentives to the safest drivers. Through telematics, safe drivers stand to see their premiums fall by up to 30 percent.”
If Octo detects reckless driving behaviour, the company can send the customers real-time hints and tips via the smartphone app. For example, after each journey the driver can see the number of ‘harsh events’ such as instances of hard breaking or acceleration. The insurer can choose to offer incentives for drivers to improve – for example, a promised reduction in insurance premiums if their risk score falls below a certain level. If the reckless behaviour persists, Octo can feed that information back to the insurers, which may choose not to renew the cover.
Jonathan Hewett adds: “By encouraging better driving habits, we aim to make the roads safer for everyone. If we can successfully improve people’s behaviour, we can stop considerate drivers from shouldering the burden of excessive premiums.”
Accelerating claims procedures
Reaching beyond risk assessments, telematics can help insurers simplify and accelerate claims handling. Traditionally, insurance claims made after car accidents have always relied on subjective accounts given after the fact. With hard data from the black boxed analysed by SAS, the precise force and direction of the impact, spare parts needed, and the context of the crash is visible to all parties, helping avoid disputes between claimants and allowing insurers to complete claims 50 percent faster. With growing numbers of autonomous vehicles set to occupy our roads in the next few years, these capabilities may prove vital in identifying error and apportioning blame.
“We’ve been able to streamline the whole insurance process, to the point where insurers have experienced an up to 18 percent improvement in their combined ratio [the difference between income from premiums and claims pay-outs plus operational expenses],” says Jonathan Hewett. “Reducing expenses means providers can pass on savings to their customers, in the form of discounts for good drivers.”
Building positive relationships
Telematics can help insurers to transform their transactional relationships with customers into meaningful, positive bonds. For example, Octo’s data can help insurers offer new services, such as locating a vehicle if it is stolen, and advising drivers of electric cars on how to extend the range of their vehicle.
The road ahead
By addressing a niche in the market, Octo has become the world’s leading insurance telematics provider. Jonathan Hewett concludes: “Our data-set now contains over 207 billion miles of driving data, and continuously receives new information at a rate of 60,000 miles per minute. SAS Visual Analytics enables us to crunch huge data volumes and generate actionable insight for insurers and customers, ensuring a better deal for all.”