{"id":15059,"date":"2016-11-18T17:11:37","date_gmt":"2016-11-18T22:11:37","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/telematics-how-flo-is-tracking-your-every-move\/"},"modified":"2016-11-18T18:21:45","modified_gmt":"2016-11-18T23:21:45","slug":"telematics-how-flo-is-tracking-your-every-move","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/telematics-how-flo-is-tracking-your-every-move\/","title":{"rendered":"Telematics: How Flo is Tracking Your Every Move"},"content":{"rendered":"

For decades, the $185 billion auto-insurance industry and its business model have remained stagnant.[1] Insurers determine auto premiums based on a driver\u2019s record information collected at the point of sale \u2013 age, sex, location, credit score and driving record \u2013 with no visibility of driving habits and\/or other potential risks.[2] There is little interaction or ongoing feedback between the driver and the insurance company, apart from the regular premium payments and the infrequent claim processes.<\/p>\n

Usage-Based Insurance (UBI), or auto telematics, has shown the potential to drastically alter the way auto insurance industry operates and connects with its customers. By installing or embedding telecommunications devices (telematics) into cars to transmit real-time vehicle data and driving habits, insurers can measure and price premiums more accurately and effectively, and increases affordability for lower-risk drivers.[3] In other words, behaviors of individual drivers are playing a greater role in determining risk, fundamentally changing the way insurers think about and value their customers.<\/p>\n

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Today, most of the national auto insurance companies in the US offer UBI programs to reward safe drivers with lower premiums. Developed either in-house or through a third party vendor, these UBI programs and their service features are oftentimes a key differentiation between insurers.[4] After a certain monitoring period, not only would the \u201cgood\u201d drivers be rewarded with 5% – 30% discounts on policy premiums, they can also review their entire driving activity and program diagnostics through a visual web browser dashboard.[5] As competition intensifies within the insurance industry, these features are intended to lure and retain good drivers by incentivizing good driving behaviors.[6]<\/p>\n

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Progressive and its SnapShot Program<\/u><\/p>\n

The\u00a0first auto insurance company to disrupt the market with a UBI program was Progressive. Launched in 2008, Progressive\u2019s SnapShot Program was designed to provide drivers the ability to control their premium costs by incentivizing them to reduce miles driven and adopt safer driving habits.[7]<\/p>\n

The device, which plugs into the On-Board Diagnostics Type 2 (OBD-II) port in the car, collects data to diagnose vehicle activities and driving behavior, and continuously streams the data to Progressive while driving.[8] The program has access to virtually every information system in the car: engine, brakes, transmission, electronics, etc, and can measure a number of elements of interest for premium underwriters:<\/p>\n