Both the Houses of Parliament have passed the Digital Personal Data Protection Bill, 2023, and it now awaits Presidential assent to become law. The objective of the Bill, quite rightly, is to ensure maximum protection against misuse of personal data (by provisioning heavy fines up to ₹250 crore). At the same time, it seeks to create an enabling environment for government and business organisations to harness data to enhance their respective value propositions.

In its report ‘India’s trillion-dollar digital opportunity’, the Government highlights a number of use cases across industries to reap the benefits of the ‘Digital Economy’. For the insurance sector, the report says: “Insurance companies could use (..data..) to assess risk when calculating premiums.” (Page No 156).

The insurance industry is one of the earliest adopters of data and data forms the fulcrum of the business model of the industry. However, the industry appears to be stuck in a rut as usage of digital data and technology paradigms necessitates adapting to evolving business models.

Telematics

One of the areas where data is reasonably pervasive but the industry has not actively started using is in telematics. Telematics refers to the use of advanced communication technology to monitor and transmit real-time data about a vehicle’s behaviour and the driving habits of the policyholder. This data is collected through various sensors and onboard devices installed in the insured vehicle. The information collected is then transmitted to the insurance company for analysis and risk assessment.

Driving usage, speed, acceleration and braking, cornering, location, type of roads, time of day, place of parking, etc., are all the different kinds of data that can be easily transmitted to the insurance company which can then be used to evaluate the risk and premiums charged on personalised risk evaluation. The same information can be used during claims settlement also, along with inputs from dashboard cameras.

However, unfortunately, in India, usage is close to zero. In the initial discussions around adoption of telematics, the industry was hesitant. Main reasons include:

Need for an additional device and its prohibitive cost

Lack of clarity on who owns the device and who will pay for it

Mobile app-based programmes did not have sufficient safeguards. For instance, the mobile can be kept at home while using the car just to avoid mileage count.

While the industry continues to talk about it and takes perfunctory steps, the external situation has dramatically changed.

Today’s vehicles come with hundreds of chips and are already communicating the required data. There is no need to install any new device to get the information. However, in the new scenario, it is the car manufacturers who have custody of the data. Aggregators like Ola and Uber also have custody of the data that the insurance industry needs. All drivers on aggregator platforms are permanently connected to the back-end through the apps and a subset of information can be collected through the apps.

Therefore, when it comes to cars and taxis (and, increasingly two-wheelers), data is already being collected without any additional effort. Usage of this technology amongst fleet owners of passenger and goods vehicles will only become ubiquitous in the near future, if it is already not.

Sharing of data

The question is: Why would car manufacturers and aggregators share the data with insurance companies? Many of them already have a presence in the financial services space or have aspirations of getting into the space. It is reasonable to expect them to obtain licences — either as intermediaries or as underwriters.

There can be a plethora of benefits for the end-customer. Renewing the policy every year is a pain for any customer. The need to get the vehicle inspected in case of break in insurance is harassment.

Being “connected” with the vehicle at all times, the necessity of renewal itself can be obviated. Imagine if the insurance is linked to the road-worthiness of the vehicle and the premium is built into the on-road price of the vehicle. The limit of innovation is imagination.

Car manufacturers and aggregators can offer these seamlessly along with their other services. Disputes of “wear and tear”, depreciation, etc., which are rampant during claims settlement can significantly be reduced as required data is available.

So, what happens to the insurance industry? Is it staring at a potential Kodak moment?

Probably not. It requires them to innovate not just their offerings but also their business models.

A good example for this will be the “Drive Safe and Save” programme jointly driven by State Farm Insurance and Ford in the US. All 2020 or newer Ford or Lincoln vehicles are eligible to join the programme and discounts up to 30 per cent is offered based on driving behaviour.

The connected car will automatically provide information including mileage and driving behaviours that will be used to calculate discounts and savings.

This is a tripartite relationship between the manufacturer, insurer and end-customer. This is a potential template for the future.

The writer is an independent IT consultant specialising in insurance. He was earlier with New India Assurance, Wipro Technologies and IBM

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