A new usage-based insurance (UBI) software platform will allow companies to track drivers' behavior through smartphone sensors and geolocation services.
Agero, one of the nation's largest suppliers of roadside safety software and services to automakers and insurance companies, said its new UBI telematics suite will transmit to insurers the information needed to offer discounts to good drivers, penalize others, and send alerts to emergency assistance service providers.
The UBI suite consists of the PolicyPal app, which tracks driving habits in real time, and Auto Crash Notification (ACN), which automatically notifies emergency services within moments of an accident.
Currently, insurers State Farm and Progressive offer customers the opportunity to voluntarily participate in programs in which the insurer collects vehicle data and uses the information to determine driving habits, which in turn can be used to offer lower-rate incentives to safer operators.
Unlike Agero's new platform, however, State Farm's In-Drive and Progressive's Snapshot programs use a small data collection device that plugs into a vehicle's standard OBDII onboard diagnostics port under the dashboard and transmits data from a car's central computer to insurance companies.
Agero's new mobile suite will greatly expand upon the universe of consumers who can vie for "discount rates" based on their driving profiles. The mobile device also travels with them in or out of the vehicle.
'15 minutes or less' -- the price wars
Over the past decade, the insurance industry has been embroiled in a heated price war, with companies vying to be king of the heap for discount pricing.
"It's becoming a cutthroat market. They're competing on price," said Jeff Blecher, senior vice president of strategy at Medford, Mass.-based Agero. "To break that mold, they need a new business model. UBI does that. Now, they can compete based on the risk profile of drivers."
UBI offers the insurance industry new opportunities for tailored discount programs. Notably, they can switch from relying OBDII dongles plugged into the customer's car and instead use mobile apps that travel with the driver, whether he's traveling in his own car or another vehicle.
"We want to align our strategy... with the smartphone as primary data collection point," Blecher said.
Emergency and roadside assistance services, such as GM's OnStar, today use vehicle sensors and telematics systems to detect accidents and mechanical problems and then alert emergency first responders or roadside assistance providers. Blecher said smartphones are a better option.
"The problem we had was [that] although connected vehicle services are more prevalent than ever before, still only 5% of vehicles today are actually connected," he said.
Mobile devices, Blecher said, are leading-edge tools that most people own and that travel with customers wherever they go, even if they're not driving their primary vehicles. That means that if a customer is involved in an accident while driving a rental car or riding in a cab, the insurer can still notify emergency services via the smartphone.
Agero has five contact centers in the U.S. that operate around the clock to handle emergency notifications. Insurers using the system get information about accidents through the smartphone almost instantaneously, allowing them to begin the claims process more quickly, Blecher said.
The new UBI apps use a smartphone's GPS, accelerometer, gyroscope and magnetometer to discern the difference between a dropped phone and one that has been involved in a vehicle accident. A Hadoop-based analytics engine determines how to alert an insurance company or roadside assistance service in seconds, Blecher said.
Agero claims that it serves seven of the top 10 insurance companies and that 75% of the new passenger vehicles sold in the U.S. are covered by its roadside assistance services. As a result, Agero has "more information about cars and drivers than any other company."
"The raw data comes to one of our data centers where we do the processing. We then have direct connections into insurance companies," Blecher said. "They see the processed data and can make the evaluation on risky behavior to calculate risk premiums to insurers."
If a driver is in an accident, his smartphone will let him know that it's about to send a notification to Agero; the driver has 30 seconds to cancel the notification.
Nate Cardozo, an attorney with the Electronic Frontier Foundation, said technology like Agero's UBI suite that automatically sends data to insurers and automakers should raise red flags among consumers because "they have no way of finding out" how the data is being shared.
"Automakers are not required to disclose that information, and there's no federal mandate for it," Cardozo said. "Take Ford Sync, for example. In its terms of service, it says it's collecting location data and call data if you use Sync to dictate emails."
In another example, in 2011 GM's OnStar emergency notification and roadside assistance service began collecting data about the health of vehicles' mechanical and electrical systems.
The program was designed to help GM improve its own service by enabling the detection of mechanical problems or upcoming service needs. OnStar is also used to track stolen vehicles. However, GM shared data with third parties, according to Dominique Bonte, a vice president and practice director at ABI Research.
OnStar was also selling personal, but anonymized, information on vehicles, including speed, location, seat belt usage and other data.
The critical mistake that GM made with OnStar, Bonte said, is that the data collection and sharing program was based on a driver opt-out model.
Unless the data connection in an OnStar-enabled vehicle was deactivated, information about the vehicle -- its speed, location and other data -- continued to be collected, even if a driver hadn't subscribed to the plan.
"It was quite complicated to opt out. Of course, the common wisdom is not to do opt-out, but opt-in," Bonte said. "Unfortunately for GM, it was not the first mistake they made or the last. They failed to observe most essential rule in privacy... [and] they were forced to stop using the data."
Agero’s UBI platform encrypts the data from the device to the company's private cloud and the data is always encrypted at rest, according to Blecher. All sensor data is stripped off of any "peronally identifiable information" before encrypting and transmitted.
"Agero’s platform uses various secure methods to relate the sensor data back to a subscriber. Longer term data is anonymized and stored in an encrypted format for regulatory compliance or to adhere with partner requirements. Agero’s apps use best practices and all available secure coding practices along with biometric and other means to secure the data on the devices," Blecher said.
Unlike OnStar, which connected about 6 million drivers to its service, smartphones have the capability of connecting tens of millions of drivers to UBI services. In that one aspect, smartphones will be different from other proprietary, in-car technology, Bonte said.
"They will be a point of vulnerability, which will become huge," Bonte said.