Milliman has announced a new innovation in the InsurTech space—a driving “risk score” created with tech start-up Zendrive that is up to six times more powerful than the leading predictive models.
Milliman teamed up with Zendrive, a smartphone-powered driving analytics company, to study how distracted driving and other driving behaviors can lead to auto collisions. Using Zendrive data, Milliman verified the behaviors that were strong indicators of collision frequency and created a risk score to compare the “worst” drivers relative to the “best.” Their findings revealed that the worst 10% of drivers were over 13 times more likely to be involved in a crash than the best 10% of drivers. The results were based on one of—if not the—largest telematics data set in the United States. As of today, Zendrive has captured over 40 billion miles of driving behavior via smartphone sensors.
Smartphones can measure driving behaviors that traditional, first-generation telematics can’t, such as who is driving the vehicle and phone usage contributing to distracted driving. These new-age predictors contributed to a risk score that is over six times more accurate than the current industry leader models, which use traditional hardware-based telematics devices. There’s an opportunity here for auto insurers, especially commercial auto fleet insurers, to be early adopters of this technology, and improve their abilities to measure and rate risk.
To read more about the study, click here. Also, to read more about Milliman’s InsurTech research, click here.
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Increasingly, individuals are having their driving habits and living environments monitored electronically. A recent Insurance Journal article cited Milliman’s Sheri Scott discussing how exposure data tracking is shaping new underwriting practices for personal lines coverage like auto insurance.
Here’s an excerpt from the article:
Exposure tracking and the advent of autonomous vehicles are shifting personal auto insurance risk exposure from dependence on driver skills, estimated distances driven and garage location to the precise determination of vehicle locations, driving habits, driving distances and traffic conditions, all determined through the collection of trip data gathered in real time.
Yet even these underwriting considerations will soon be supplemented, if not supplanted, by the loss experience of automated vehicles and their manufacturers.
This transformation will not be without risks of its own, Scott said. In particular, she cited disruption of networked communications as a hazard, especially as vehicle occupants become dependent on automated control and less practiced at taking control of a vehicle.
“If some kind of communication goes down, there could be a very serious occurrence,” she said.
Part of working with “Insurtech” companies is understanding and accepting that actuaries are moving beyond their traditional roles. Insurtech companies aren’t asking us to come in and perform traditional actuarial work. There are no set formulas in the Insurtech space. Instead, actuaries must take a forward-thinking approach. We must learn how to use traditional tools in a new, creative way to produce better business solutions.
Milliman recently worked with Hippo Insurance, a revolutionary California-based startup providing home insurance for modern households. We helped Hippo understand how traditional insurance works, which has enabled them to fundamentally challenge the status quo using new systems, technology, and business practices.
Insurance contracts are often delivered through old-fashioned processes and contain a great deal of outdated coverage and legalese. What Insurtech companies like Hippo are doing is completely modernizing the sales process, and the underlying coverage being purchased. They’re also helping policyholders understand how to better protect their property by installing cutting edge smart home devices that monitor and detect damage before it occurs.
Milliman enjoys working with these innovators, and is capable of helping traditional insurance companies bridge the gap, too. They can rely on us to be familiar with new technology-based approaches to produce modern products for customers.
The following video features Hippo’s leadership team and its modern approach to homeowners insurance.
I had the pleasure of recently participating in a panel discussion on predictive modeling at the 2015 Casualty Actuarial Society (CAS) Ratemaking and Product Management seminar in Dallas. Prior to the meeting, the CAS conducted a predictive modelling survey, and the panelists were there to discuss both the results and the emerging role that actuaries play in predictive modeling. And it’s an important role! I always try to include an actuary on a predictive modeling project, teaming actuarial expertise with subject matter experts as well as data scientists. This kind of collaboration makes for stronger models. Actuaries bring a unique business knowledge to the mix, while the data scientists will challenge norms. The result of this collaborative tension: Innovative and relevant business insights.
The CAS issued a press release earlier this week recapping the panel. You can read it here, or contact me for more information.
Predictive analytics enable organizations to identify their most profitable and expensive customer groups. These tools analyze business data and processes to help executives make informed decisions. The following videos highlight Milliman’s predictive analytics solutions.
Hurricanes and analytics: A 21st-century approach to pricing
• Matt Chamberlain discusses how geographic information systems (GIS) can be used to price hurricane risk. To learn more about how geocoding can lead to more accurate pricing, read this article.
Improving claim analytics through text mining
• In this video, Phil Borba explains how text mining can reveal valuable information hidden in the narratives of auto insurance claims that could lead to improved underwriting practices.
Milliman Datalytics-Defense: A new approach to understanding defense costs
• Milliman Datalytics-Defense analyzes data related to litigation costs to help businesses develop more effective claims defense strategies. Milliman actuary Chad Karls offers perspective in this video.
For more information about Milliman’s predictive analytics solutions, click here.
Predictive analytics enables companies to identify their best- and worst-performing customer groups by helping them enhance their decision-making processes.
In this short film, Milliman consultants Nancy Watkins, Matt Chamberlain, Peggy Brinkmann, and Sheri Scott discuss how predictive analytics can uncover value in new and expanding data sets. They also discuss how insurance companies can use the technology to improve their pricing and underwriting practices as well as increase profitability.