The opportunity to use data for insurance product marketing was demonstrated yet again with a twist on telematics by new insurer MetroMile (Redwood City, Calif.). Co-founded by parametric underwritten crop insurance pioneer David Friedberg, MetroMile offers policies priced according to distance driven, as well as offering other data-powered services. It's the second of Friedberg's ventures that use data to compete with insurers.
As reported in today's New York Times, MetroMile has targeted Oregon drivers because of the state's openness to new products and Portland residents' participation "a general movement toward more dense urban living, more bicycling, and more walking." The article says that the insurance offering is planned to be only one part of a suite of potential services.
The [data collecting] sensor [within a policyholder's car], which is connected to cellphone networks, is also tied to a car’s on-board computer and can collect diagnostics data, emissions data, and other information about the condition and performance of an auto. Over time, the company plans to offer subscribers information about ways to drive more safely, get more miles to a gallon of gasoline, or judge better what is being fixed in their cars.
“By having people pay per mile, it also creates an incentive to drive less,” said Steve Pretre, the chief executive and cofounder of MetroMile, which is headquartered in Redwood City, Calif. “We can help people make lifestyle decisions they want to make anyway.”
MetroMile appears — at least for the moment — to be taking a fairly narrow view of rating factors that can be considered through telematics-based pricing and underwriting, according Donald Light, director of Celent's Americas property/casualty practice. "Telematics can track time of day, location, acceleration and other data that can describe how safely a car is being driven," he says.
[Read about the future of auto insurance: NTSB Safety Recommendations Bring Lower Auto Premium Closer.]
David Friedberg, who co-founded MetroMile with CEO Steve Pretre, introduced himself as a non-traditional competitor in the insurance market through Climate Corp. The company sells insurance to farmers based only on data about the weather; if certain conditions prevail in certain locations, Climate Corp simply pays policyholders without their needing to submit a claim. The product is designed to supplement federal crop insurance which doesn't cover farmers' full exposure.
Being able to profitably cover losses related to factors such a given number of days above a certain temperature requires very granular geographic data, according to Friedberg. In a recent conversation he told I&T that Climate Corp looks at over a million 2x2 mile location segments across the U.S. The company monitors the locations and has simulated weather for all of them for 730 days, 10,000 times. "It becomes a massive scale computing challenge," Friedberg noted. "That’s where the technology comes in, to enables us to create a project that works for farmers."
Today insurance companies are asking themselves how and to what extent they can "do" Big Data. They should notice that David Friedberg's activities show that data companies have found that they can do insurance:
We consider ourselves a technology company. Trying to monitor and simulate the weather on a microscale basis and that requires significant investment and development of technology. We don’t necessarily consider our selves an insurance or agriculture company. That just happens to be a way to deliver value to a set of customers that really need it.
[For more on parametric underwriting, see MiCRO Demonstrates Viability of Parametric Underwriting for Microinsurance Coverage.]