Mounting motor data promises pricing revolution

The amount of data the motor industry is lining up to create will force the insurance industry to rethink its pricing approach, if it can get its hands on it, predicted AXA’s David Williams.

Speaking during the Insurance Times webinar titled ‘Managing Risk in a Connected Vehicle World’, Williams said there would be a seismic shift in the way the motor industry is viewed: “We are going to have to completely change our approach to pricing.”

Sponsored by Collision Management Systems (CMS), Williams, who is AXA’s director of underwriting and technical services said the sheer amount of data could prove to be too much for insurers to handle if connected and autonomous vehicles were to become mainstream.

“In self-driving cars, a test vehicle can produce around 14 terrabytes of data in a day. And it’s a strain on the network systems,” he said.

And the whole panel, which also included CMS founder and chief executive, Charles Smith and Zurich’s head of liability claims, Calum McPhail, agreed with Williams.

McPhail said: “We don’t know how much data is there, we know it is a lot.

“We know that the amount of information available from an airbag is massive, in terms of collision data which is not shared.”

He then went on to say that if there is a large amount of data available from a single component of a regular vehicle now, that the amount of data from a connected or autonomous vehicle would be daunting for some insurers’ storage systems.

How do we get the data?

This scenario, however, is reliant on insurers being granted access to the data that they feel they need. At the moment, manufacturers are owning the data and keeping it for themselves.

Smith said: “Cars are connected but manufacturers are keeping the data for themselves. They are starting to open that data up a little, but only in very specific cases. Not been made available on mass.”

Williams believes original equipment manufacturers (OEMs) are fitting components to cars in the hope that they can collect the data for themselves.

“OEMs see connected vehicles as a potential revenue stream,” he said. “If OEMs control the data and charge other companies for it, that entrepreneurial spirit around the motor market will die.”

But how do insurers convince manufacturers to provide them with the data and reap the benefits in the long-term, rather than sell it on to a contractor and be better off quicker?

Smith doesn’t believe it will be up to the insurers to convince them.

“I don’t think it’s a case of insurers convincing manufacturers,” he said.

“When we engage with the supplier of the data, the driver comes from the end customer. The same analalogy could be transferred to personal lines.

“A consumer will want choice. It could get to a point where a customer can put their data online and get a quote from that. We are way off that but it could happen.

“It’ll be consumer demand that will push it.”

Williams was slightly more cautious regarding the behaviour of motor manufacturers.

“I’ve seen the behaviours of some motor manufacturers who clearly see this as their income stream for the future.

“I think as cars become more connected as standard, there will be more of a consumer demand, and maybe legislative, for us to move towards that.”

McPhail questioned the need for legislative action, while pondering just how much data an insurer will want to bring in.

“In America, I believe they require insurers to share data, certainly in relation to accidents. There’s so much data there, there has to be caution from an insurer as to how much data you want to bring in.”

Can insurers handle the data?

Williams said that the amount of data a connected vehicle market will bring in brings challenges, but speaking from an AXA perspective, he believes that work is being done.

“I think we’re getting ready for autonomous vehicles,” he said.

But he felt the only way insurers will be trusted with the data is if there is more transparency around what it is going to be used for.

“If we’re getting and keeping data, we need to justify why we have got it. Just because a vehicle can produce 14 terabytes of data a day, doesn’t mean we need all of that.

“We need to be looking at that data, and working out which parts are useful.”

Smith agreed. He said: “That is the challenge. Insurers only want the relevant data.

“A lot of info isn’t very portable as it has been processed more than once, and the raw data is lost to mainly minimise storage costs.

“So understanding what data is useful is the number one factor.”

He said that when connected or autonomous vehicles come, apparently by 2021 according to the government, “there almost needs to be a reset button and we need to use a new data set,” because insurers don’t want to integrate the new data into their old systems.

What is the connected market going to change?

Williams believes the industry is going to have to approach pricing in a completely different way once connected and autonomous vehicles are more common on the road.

He said: “We are going to have to forget all about human behoviours and focus entirely on technology behaviours.

“We need to come up with a completely different pricing approach.”

He also warned that, due to the rapidly evolving technology and complexity of builds, some body shops won’t be able to cope, potentially with drastic consequences.

“Talking about electric and new tech, there is the whole repair situation, we at Axa have had some very complicated claims on relatively small vehicles. Once they become electric, some motor body shops won’t be prepared for it.

“There is potential for a massive disaster in the supply chain.”

But he offered a solution: preparation.

“There is going to be a massive push for electric components, and what we need to be doing is investing.

“We need to be working with our suppliers, OEMs and Thatcham to make sure we are prepared for whatever changes may come about, because it is going to be very different.”

Thatcham Research is the motor insurers’ automotive research centre, it claims to be the UK’s only not-for-profit insurer.