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Data, driverless cars and the future of the insurance business

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The ability to use terabytes of data to set insurance pricing is helping most drivers pay less, but the rise of the autonomous car could change the industry from one that insures drivers to one that insures the elements of the car, according to Glenn Renwick, chairman, president and CEO of Progressive. In a conversation at the Rutberg Global Summit Tuesday in Atlanta, Renwick covered Progressive’s 14-year history in trying to use data to set pricing, and the lessons he has learned.

Times have changed since 1998 when Progressive started installing devices in customer cars to get relevant data. For example, at first customers rebelled against the idea of having continuous monitoring that included GPS data, but Renwick said, “We think that there might be a time in the near future when that will change.”

For now, customers are monitored for a 6-month period with the Progressive device and then that collected data is sent to the insurer. GPS isn’t included. Yet, still, data such as hard braking, your lane changes and routes driven are enough to start making strong inferences about how you drive. “We’re moving away from correlation to causation,” he said.

There are huge ethical and regulatory aspects to his pitch. A “risk pool of one” is an oxymoron when discussing insurance. For every person paying less for insurance there’s someone who has to pay more. And since insurance is required to drive, this runs the risk of pricing out a population. Renwick danced around that issue, finally settling on the idea that driving is a privilege, and not a right and saying that regulatory bodies will have to address this.

“There’s no free lunch: some get to pay less and so some should be paying more,” Renwick said. “So you will see a sea change in how people are allocated [between insurers]. We saw it once before with the introduction of credit.”

He also didn’t have a great response to questions about what Progressive will do once the cars themselves are collecting the data, as opposed to the Progressive hardware. He clearly is ready to get out of data collection hardware, and said he had expected to be out of the business earlier, but the connected car is still in development.

As for the further-out technology of driverless cars, Renwick anticipates the shift to such vehicles causing both industry consolidation and also a shift in what a company like Progressive will insure. Instead of drivers, he suggested that the company could insure things like batteries or the LIDAR systems that make the cars work.

6 Responses to “Data, driverless cars and the future of the insurance business”

  1. Applause, applause to both Gigaom and Mr. Renwick of Progressive! The title of this piece is worth noting as “Data” is ahead of the “driverless car”. Whether or not this was intentional, the end result is wonderfully insightful. While insurance pioneering CEO, Mr. Renwick certainly doesn’t require affirmations- I’d like to note for the record my own change in thinking since reading his remarks. I’ve been saying automated driving will rewrite the insurance industry since 2007, along with 5 other key trends. I was wrong. These are impactful to be sure- but they are the result of a larger issue/trend comprising the true roots of disruption for insurers of all lines- and Mr. Renwick nailed it- Data. The pace with which an unprecedented volume of “new” data becomes accessible is on an exponential growth curve. Determining which data is relevant, which data is usable, which data consumers will accept as usable, and even more importantly data that will be available for extraction in future applications will be key for insurance & warranty leaders on the other side of this monumental societal shift in personal mobility. Thank you Mr. Renwick and thank you Gigaom!

    • sunforester

      As if we didn’t face enough invasion of our lives with Big Brother Big Government, now we have an insurer ready and will to be Big Brother to us for profit. Just imagine our insurers watching every move we make in our cars and then tattling on every single one of our driving mistakes and mishaps to Big Brother Big Government. We won’t need cops pointing a radar gun at us any more to put us in jail or paying huge fines – all we need is Renwick’s Big Brother machine to keep us in line and in fear for our freedom.

      • Sprout

        You think there’s “an insurer” doing this? There are dozens. And most others are already using GPS data today. Oh and if you have a mobile phone, it’s all but moot anyway as you’re location data is out there. And new cars track you even without the insurance plug in. Unless you live in a remote shack with no connection the grid (which obviously you aren’t since you’re commenting here), your information has been around for years.

      • Dearest S.

        Our grand privacy is a myth- the sooner we accept that fact, the better off we’ll be. With what Google, Facebook and others have in store for us– we really need to start reframing this issue and considering the legal, regulatory aspects…Anyway, that being said, I am definitely looking forward to autonomous vehicles!