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The Most Accurate Predictor of Driver Risk
The Most Accurate Predictor of Driver Risk


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Does Smart Phone-Based UBI Adequately Assess Driver Risk?
An increasingly plausible option for usage-based underwriting is to combine a low-cost Bluetooth-enabled data collection device with a smart phone app in order to satisfy both quality data and customer intimacy for personal lines insurance.

Many insurance companies today, personal and commercial alike, have engaged in usage-based insurance underwriting. There are two ways of collecting the use information from the vehicle: One is using a telematics datalogger and the other is using a personal smart phone with an app running in the background. Both work reasonably well for collecting miles driven and time of day; however, if the underwriting includes any form of driver behavior data, the hard mounted device provides a superior data set.

Now, the real question is what data set provides the best correlation to actual underwriting risk. Assume that it was possible to generate a valid driver behavior risk score in conjunction with miles driven. Would that data set have more value in the underwriting process and is it cost effective? Naturally, the total cost of using an app on the user’s smart phone will have the lowest possible data collection cost. But what if the data cost of the valid driver behavior risk score was only incrementally higher, would it be the obvious choice?

One of the problems with the detailed driver behavior risk score is that it requires high quality data processed by capable servers. Therefore, until the vehicle can provide quality accelerometer data from the head unit we have to rely on plug-in devices to collect the data. Current plug-in devices are predominately uploading data via an internal cellular modem. The cost of the modem and the cellular transmission makes this solution relatively expensive. There are several vendors currently working on cost-optimized Bluetooth only devices where the datalogger cost is close to half of the cellular datalogger and the data will be transported by the user’s smart phone. This will enable high quality data collection at minimum cost.

For commercial vehicles, the existing telematics dataloggers can have a dual role as both GPS tracking/operational efficiency tools and as data collection for insurance underwriting purposes and hence the cost burden is acceptable. For the personal insurance market, the jury is still out what the right implementation should be. The smart phone app is a great marketing tool for the insurance companies, but the quality of the collected data is very poor. Recent articles on the subject suggest that the UBI path going forward should focus on easy to use smart phone apps; however, the challenge with that is data quality. Smart phone apps cannot collect motion related data (driver behavior characteristics) and barely get actual miles driven or time of day.

Although the most refined apps have worked out major kinks and no longer drain smartphone batteries or require policyholders to press “start/stop” to track every trip, the data quality from the smart phone is not good enough. The smart phone’s obvious inability to always be present and actively recording when the car is driving leads to significant data gaps. Any form of true driver behavior can not accurately be collected via smartphone. Therefore, one increasingly plausible option is that a combined solution of low cost Bluetooth enabled data collection device and a smart phone app will satisfy both quality data and customer intimacy for personal lines insurance.

When UBI Self-Selection Ends

Mobile UBI advocates tout that policyholders can simply download the free branded apps from the app store, virtually eliminating the upfront equipment costs for insurers. While this is true, what is not mentioned in these articles is that UBI is still in the voluntary or self-selected phase, meaning policyholders elect if they want to participate or not. People who are willing to use the smart phone app are already good drivers that would most likely volunteer for a UBI program in the first place. Once this self-selected honeymoon phase wears off, and we get past the initial pool of good drivers, you need data accuracy.  We have not gotten down to the population yet that have driving issues because they don’t opt in to the program, but once they do, the poor data collection devices will face a serious challenge in proving underwriting efficacy.

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San Diego startup Acculitx wants to be the FICO of driving, and it recently raised $1 million in venture capital to help it get there.

Formerly named Fleet Matrix, Acculitx makes software algorithms that analyze data from in-vehicle telematics devices to create a driving risk score – akin to the FICO credit score for consumer financing.

Acculitx is focused on the commercial truck fleet market, where insurance companies are using data to better understand the risk associated with the fleets they cover.

But Acculitx is betting that its technology also offers benefits for the emerging usage-based insurance market – where drivers are charged for insurance only when they are on the road.

Usage-based insurance is just beginning to be offered by insurance firms such as Progressive and others. Only 4 million personal vehicles out of 180 million nationwide are using it, according to Acculitx.

But usage-based insurance could become a bigger market as automakers and insurance companies continue to tap telematics data from vehicles to offer new services.

There are other companies that monitor drivers for risky behavior. But many of these systems only collect data when there is an incident, such as hard braking or rapid acceleration.

Acculitx claims its system is more accurate because it collects data all the time the vehicle is on the road.

“We believe we are the first in the world to have mastered generating a very accurate driving score based on accelerometer data,” said Peter Ellegaard, co-founder and chief executive of the 3-year-old firm. “Rather than doing just event based, we collect every single second that you drive and we score the whole thing.”

Acculitx has its roots in San Diego’s DriveCam, which is now named Lytx. Ellegaard was a former vice president of engineering for Lytx. Acculitx co-founder Alan Mann was a former Lytx vice president of sales.

The company is working with telematics equipment makers so Acculitx can access speed, acceleration, location and vehicle weight data for its algorithm. Once its software has access to this data, it can generate a score.

The company has a couple of small fleet customers and pilot projects under way with multiple companies, said Ellegaard.

Acculitx didn’t disclose the name of its investor in the recent first round of funding. It currently has seven employees, including contractors.

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Acculitx is working with many of the major insurance companies to redefine usage-based insurance (UBI) to create a more relevant identification of driver behavior and risk. We call that RBI - Risk Based Insurance.
Current UBI programs only measure how many miles you drove and when, have rudimentary event detection and weak correlators to underwriting risk.
The key differentiator of accuscoreSM is in using continuous vehicle motion data to generate a relevant predictor for driver risk with very strong correlation to actuary data. Because accuscoreSM is not ‘event’ based, it results in being the most comprehensive and accurate identifier of driver risk and behavior assessment.
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