Telematics has played a significant role in personal and commercial markets for years, leading to the transition to Usage-based Insurance, or UBI, a “pay-as-you-drive” model, essential to the sharing economy. Yet, while UBI has episodic insurance necessary for the gig economy, traditional businesses that need full-time insurance haven’t necessarily adopted UBI quite as quickly. However, many logistics companies see ingenuity being deployed for insuring the gig economy and are trying to figure out how it will impact their operations. While very different, telematics and UBI are necessary to transform the sharing economy.
The Hive Think Tank recently hosted a virtual webinar where a group of panelists discussed the future of UBI 360 and what it means for the final mile, and the impact on logistics and insurance.
Avanta Ventures’ Managing Partner Sanjiv Parikh was joined by Debie Bisdorf, Senior Manager, Amazon, Pranav Pasricha, Global Head P&C Solutions, Swiss Re, and moderator Brandy Mayfield – Chief Underwriting Officer, InShare.
Here is a portion of their conversation from the event, edited for clarity.
UBI is shifting towards software-centric telematics
Brandy: Sanjiv, Avanta Ventures has thoroughly studied telematics in the industry. What do you see as successes in telematics today, and where do you think UBI is headed in the commercial space?
Sanjiv: Let’s segregate UBI from telematics as two different sides of the coin, perhaps. And as you pointed out, vehicle telematics has been around since the 1980s. When onboard diagnostics or OBD, ports were created primarily to help with vehicle maintenance and evaluation of exhaust gasses, etc. Over the past decade or more, we can bifurcate this into two categories:
- Hardware-centric solutions: Rely on the OBD II port
- Smartphone-based solutions: Companies are evolving into mobile-first platforms to capture data and correlate those data sets with a risk score
However, the challenge with these solutions is that their adoption, even within fleets, is less than 10-15%. We have a considerable adoption challenge here. However, connected vehicle data, which is software-centric and derives telematics data directly off the vehicle platform, is beginning to be a new use case within this. An example of this is Avanta Ventures portfolio company, Motorq, which integrates real-time data from nine of the ten largest OEM (Original Equipment Manufacturer). So, as insurers and fleet managers, this enables folks to truly understand how their vehicles are being utilized and what they are doing – at the same time, incorporating some of that behavior automatically into the vehicle. We see a dramatic shift, especially in commercial vehicles, in greater adoption of companies monitoring vehicle usage. This should unlock new revenue streams for the fleet managers and owners and leverage new types of risk scores. We see a shift towards software-centric telematics.
The insurance industry needs to make a push towards telematics
Brandy: Pranav, you have a global view of telematics and how it’s being considered in commercial insurance where you sit at Swiss Re. Can you tell us more about the maturity of telematics and what you see in other spaces? How is it working relative to correlation with losses? And what do we know or not know just yet?
Pranav: To answer the first part of your question, I wanted to echo some of Sanjiv’s sentiments earlier. At Swiss Re, we are excited about the shift to the connected vehicle ecosystem that will propel the industry forward in many different ways. Some fundamental concerns remain, but I think that will be a big step forward. To your point, in general, on both the personal and commercial side, I think we would all have hoped for more adoption in telematics. I think the reasons between the two sides are different.
On the personal side, it happens to be around privacy, adverse selection, and cost. On the commercial side, I think we are a bit more bullish about penetration, and the reason for that is that I believe the stars align much better between the various players on the commercial side. There is an alignment of interest between the carrier and the fleet owner. Despite being in an advanced economy, where almost everyone already has some electronics or telematics-enabled device in their vehicle, we are struggling to gain traction. The insurance industry must push telematics more than we have tried in the past. This is generally something that is holding the industry back. We are very keen at Swiss Re to proactively help in that regard.
Third-party fleets
Brandy: Debie, as a risk management leader at Amazon, you shared about the third-party teams you oversee. Can you share a little more about the types of fleet owners and types of fleets involved?
Debie: The big ones I oversee are the Amazon freight partners, which are in the middle mile space, and the delivery service partner programs, which are very similar. We look to entrepreneurs and help them build their businesses. Essentially, they are middle-mile and last-mile logistics companies. Through Amazon, we offer a variety of value-added services to help support their business, one of which is an insurance program. In the last-mile space, I also oversee a flex program similar to the Uber and Lyft model, where it’s gig workers who deliver packages to their convenience. They will get a block of packages and deliver them in their free time. So, I oversee two different models for the last mile.
Brandy: Can you speak to what types of vehicles are used in each of those models?
Debie: The flex model is individual and personal vehicles, so very similar to the “bring-your-own-vehicle” model. In the middle-mile and last-mile spaces, there is a mix of Amazon-owned and Amazon-rented fleet owners who own their vehicles. We also use rentals, so we see an extensive combination of vehicles in those two spaces. This is challenging to the telematics; what we have in an Amazon-owned vehicle may look slightly different from what we get from a rental company. That stitching together of the data points that we’re getting from each of those other vehicles to use that data to make assumptions on insurance claims costs becomes more complex over time as your vehicles and fleet grow.
Thank you to the Hive Think Tank and all speakers for a dynamic discussion. We look forward to the future of insurance for the sharing economy.
About The Hive Think Tank
The Hive works actively with founders to co-create, fund, and launch startups focused on AI in the Enterprise. The Hive model is a high-touch model, that applies its entrepreneurial and operational experience to accelerate company building. The Hive team consists of successful company-builders, serial entrepreneurs, and investors who have created market-leading companies with several billion dollars in exits.
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About Avanta Ventures
As the venture capital arm of CSAA Insurance Group, Avanta Ventures invests deep industry expertise, resources, and investment in startups creating products and services that offer extraordinary value to the AAA Members of today — and those of tomorrow. As an affiliate of CSAA Insurance Group, Avanta Ventures is aligned with one of the top personal lines property and casualty insurance underwriters in the United States and part of the AAA ecosystem that serves over 53 million members.
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