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Smartphone, connected car data may hold key to faster auto quotes

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A connected car manufactured by BMW
Source: Getty Images

Auto insurance and analytics companies are looking at data from drivers' smartphones and on-board vehicle computers to help offer consumers up-front coverage quotes, and potentially lower rates.

Historically, drivers looking for auto insurance have heavily emphasized price when making purchase decisions. Usage-based insurers usually cannot provide instant quotes for consumers because they rely on motorists driving with hardware or on-board apps when making underwriting decisions. That can put them at a disadvantage versus conventional auto insurers, which can offer those rapid quotes.

Mobility data and analytics company Arity LLC and insurtech underwriter Root Inc. are taking advantage of existing devices and information to rapidly assess drivers, in some cases allowing for instant quotes. That makes it quicker and easier for customers who choose to make their data available know what they might have to pay for usage-based policies, which can be cheaper than traditional policies.

Using connected car data "really allows us to provide an instant quote that is much more data informed than otherwise," Root CEO Alexander Timm said during a quarterly earnings call.

Internet-of-things auto insurance arrives

Usage-based car insurance, which calculates premium rates on how safely motorists drive, has yet to gain widescale adoption even after the COVID-19 pandemic altered driving habits. Arity is counting on the ubiquity of smartphones to drive growth in usage-based policies. While less than 10% of auto policies in force are based on drivers' documented habits, about 80% of people have smartphones, Louisa Harbage-Edell, director of product marketing and intelligence for Arity, said in an interview.

Arity has relationships with companies that make navigation apps and other applications, like gas station finder GasBuddy, to access location and driving data when insurance applicants give permission, Harbage-Edell said. It can also use information from its own data-gathering platform that ties into lifestyle applications.

"Just like how insurance companies can use a [Department of Motor Vehicles] report or credit. It's just one more data source they can pull," Harbage-Edell said.

Root's new pricing platform relies on the rise of connected vehicles, which have not only embedded sensors, but also native internet connectivity and telematics control. RootReady offers instant quotes to drivers of certain vehicle models sold since 2015.

More than 90% of new cars sold in the U.S. have some connectivity, according to Root. In some circumstances, Root offer a quote based on cars applicants previously drove for which the company has connected data, said Timm. Without vehicle information, Root cannot offer premium rates to consumers who shop for insurance on internet-based policy comparison sites.

App-based data as source of information for driving markers

Smartphone-based applications are the most promising source of information for insurers out of the ever-expanding database of personal information, referred to as the internet of things, said Christian Renaud, a research director at the internet of things practice for 451 Research. Not enough vehicles on the road have built-in sensors useful for telematics, he said, and dongles that must be attached and remain connected depend on customer attentiveness or technological fluency, neither of which is reliable.

"Having an app-based approach is the most attractive from a cost basis and from a pervasiveness basis, given the penetration of smartphones," Renaud said in an interview. The marketplace for third-party data is vast; even gaming apps need access to the sensors on smartphones.

Many options are available to telematics-based insurance for companies willing to use third-party data, Renaud said.

"I can look up your phone number and buy [information] from marketplace telemetry data and use that to price your stuff," he said. If that's not available, Renaud said companies would look at data from others in the same age cohort who are driving similar cars and build risk models to come up with rates.