Tackling the Infrastructure Challenges of Telematics in the Insurance Industry
In this day and age, telematics is digital gold in the insurance industry. Barely 60 years old — a baby compared to most other sciences — telematics is proving to be one of the most powerful pieces of equipment in the actuarial toolbox.
Auto Insurers Love Telematics
No one stands to benefit more than auto insurance carriers. GPS, the most basic form of telematics, is nearly ubiquitous in modern cars and cell phones, and the industry is starting to coordinate location information with numerous other data sets, such as vehicle performance and the weather, to form a complete picture of traffic patterns and individual driving habits. The benefits of this revolution range from more accurate pricing and faster claims processing to reduced risk and perhaps even safer drivers and fewer injuries on the road, according to PropertyCasualty360.com.
Unlike today’s black boxes, which can only be accessed and decoded by specialists, streamed telematics data can be accessed by any authorized person. Advances in analytics are making it possible to parse and interpret the data in increasingly innovative ways that are often mutually beneficial to the insurer and customer.
These uses are part of the reason why the insurance telematics market is on pace to top nearly $2.2 billion by 2020, according to MarketsandMarkets, growing at a compound annual growth rate of more than 20 percent. Contrary to early beliefs that consumers would balk at being watched by their insurance companies, it turns out that drivers are eager to adopt in-car connectivity to lower their premiums by proving they are better drivers than others in their risk pool.
Can Insurance Infrastructure Keep Up?
How exactly are insurance companies supposed to build the infrastructure needed to support such a large and dynamic pool of data? How will they be able to make sense of all the data in ways that benefit their business processes?
The infrastructure requirements for a scale-out telematics system are substantial, as it involves massive data volumes and advanced big data analytics. However, the insurer need not bear the brunt of this burden alone.
Medium explains that emerging services such as Baseline Telematics are using the IBM SoftLayer platform as a foundation for 100 percent hosted cloud solutions, providing insurers with near-instant data on claims that have yet to be filed and risk assessments for policies under consideration. SoftLayer provides a highly dynamic virtual infrastructure that allows Baseline to deploy and scale telematics services for insurance companies around the world. It even supports mobile infrastructure, which Baseline has leveraged to deploy apps that reward drivers for good behavior while feeding valuable information back to the insurer.
Telematics Infrastructure and Architecture
However, a full telematics solution involves more than just infrastructure. Not only must the insurer develop in-house analytics and data management capabilities, but it will also have to coordinate these elements with various sensor technologies that are both embedded into and added onto connected cars from multiple manufacturers, as Satish Venkatesan, senior director of Cognizant Technology Solutions, explained on LinkedIn. This will require a top-to-bottom architecture that provides easy integration with leading telematics devices and original equipment manufacturer solutions, as well as real-time data processing and error-handling. Additionally, it should feature efficient data storage and management — enough for at least 1 gigabyte per vehicle per month — along with open APIs and a mobile-first development strategy that centers on the customer experience.
These types of constructs are not created out of thin air, of course, so most insurers will require specialized guidance on each aspect of the project, from defining the initial requirements to pulling in the first data streams. However, the market is evolving rapidly, and telematics is quickly transitioning from a strategic advantage to a basic competitive necessity.
Data on cars, drivers, road conditions and myriad other traffic safety factors will soon be out there in abundance. However, only companies that can access, analyze and leverage data to make the right decisions will be successful as the insurance industry adapts to the new digital economy.