Historically, determining car insurance rates has always been nefarious, based on measurable yet inconsistent markers of a driver’s tendency for smart, safe driving. According to iii.org, the most typical indicators of a car insurance policy quote depend on age, gender, past driving record, and the location where the driver lives and commutes.
Luckily, data has come to the forefront more and more in how we can truly assess someone’s abilities, and kasko2go is at the forefront of where risk-related data intersects with car insurance policies. kasko2go is dedicated to building the first risk assessment solution for the car insurance industry, and is now doing so by partnering with HERE Technologies to gather a bank of irrefutable data.
So far, their research has found that while traffic density was one example of an identifying factor in the occurrence of accidents, the influences that are often considered to be most dangerous actually didn’t play the most major role. For example, the kasko2go team surprisingly found that speed only played a minor role in accident sequences – in other words, speed only played a role when it was relative, and in combination to other conditions that contributed to the accident.
Nebulous Terms for Price Competition
This research is particularly important for how insurers price their premiums. To date, these premiums have been priced based on incorrect indicators of risk. Furthermore, insurers have always had an incentive to lower the price premiums as much as possible. The high loss ratio in the car insurance business is due to the price competition amongst the premiums. In the case of high market elasticity, insurers can only compete when their prices are lower than their competitors, which results in many underpriced policies.
As a result, a “winner’s curse” occurs. This is when there is a wide spread of estimated rates from the correct ones. The wider the spread, the stronger the winner’s curse. In an ideal world, if all premium rates were set correctly and according to the data, there would be no such thing as a winner’s curse, and therefore no high loss ratio for insurance companies: rather, a loss ratio that is precisely as expected.
Some insurance companies have looked to indicators like report cards for college students or credit scores for adults to try to judge a level of responsibility, and while these can certainly offer some insight into the type of person someone is, it still isn’t immediately transferable to how they drive, or their capability on the road. As such, the challenge of how to price car insurance policies – and how to label someone ‘high risk’ or ‘low risk’ – has been a consistent hurdle across the board. Then, with competition across a host of car insurance companies thrown in, it’s a constant battle for insurers to offer competitive rates while also maintaining survivable profit margins.
The kasko2go and HERE Partnership Solution
To expertly offer this level of consistently accurate information for insurance providers, kasko2go has recently announced its partnership with HERE Technologies, the leading provider of traffic data aggregation. This partnership supports kasko2go’s upcoming product, Normal Sigma, which will specifically predict the probability of a driver being in a car accident — the exact information insurers most need to know.
This accident probability rate has a proven correlation to accidents, making it a much more reliable rate. Furthermore, the data will be compiled into a risk report to the industry, so that the insurance will get a full report for each requested driver. This detailed overview will produce the most optimized risk assessment for the insurance companies’ risk portfolio.
This creates a win-win for drivers and the insurance companies alike: insurance companies don’t leave money on the table or take on too astronomical of a risk if the standard markers of responsibility seem sound, and the drivers themselves are awarded with lower rates if they’re truly safe on the road.
This is a far cry from how insurance companies are currently assessing risk. Typically, insurers have been forced to assess risk retrospectively, after an accident had already occured. This consistently leads to revenue deficits, and the sporadic data accumulated from these accidents does little to nothing in painting an accurate picture of risk for other drivers moving forward.
How The Partnership with HERE is a Game Changer
Oleg Korol, Chief Technology Officer at kasko2go, states of the partnership with HERE: “This quantity and quality of data is required for our advanced AI models, and ensures that we provide a trustworthy risk assessment solution to the car insurance industry at a time when the sector is evolving.”
As the largest provider of this type of data, the downloading process from HERE technologies to kasko2go’s database is projected to take an astounding three months for 27,000 gigabytes of information, and the information will keep compiling. In fact, this information will continue to update automatically every five minutes with new traffic and road condition information from HERE’s surveillance of over a million kilometers of road within the DACH region, ensuring that the information kasko2go offers is always up to date.
The Power of Information for all Parties
Drivers benefit because they are given the opportunity to receive fairer premiums, based on more reliable and fair metrics. It gives drivers a ‘fresh slate’ rooted in old data, rather than the current determining factors. This allows for a comprehensive understanding of risk. For these reasons, kasko2go’s partnership with HERE is likely to change the way car insurance premiums are priced across the industry moving forward.