Experiment in Motor Insurance Service: the Unibox

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• Experiment in Motor Insurance Service the Unibox
  

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The Unipol Group

• 7 companies and 1 bank are part of the group
• 8.8 billion Euro premium income in 2003
• Over 6 million customers
• 4th position on the Italian market

3
Motor Insurance in Italy

• Continuous increase in the cost of claims
  (personal injury) and of policies (61 from 1994
  to 2002)
• Major objections by the consumer associations
• Political intervention to slow down inflation
  (tariff freezing, moral suasion on the companies
  in order to reward the best drivers)
• Unipol decides to do something different to
  reduce costs and increase safety the Unibox
  project is conceived

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How does the Unibox work?

• The accelerometer detects speed variations on two
  axes (X,Y) every one hundredth of a second
• The GPS detects the position of the car (latitude
  and longitude) once a second
• Acceleration and position data are stored in the
  cyclical memory
• The data are transmitted by the integrated GSM
  using a short message (SMS)

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Strategic questions

• What could be the acceptance of the device, fear
  of control and invasion of privacy ?
• Is large-scale installation of the Unibox a
  viable option?
• Cost of the Unibox
• Tariff advantage for policy holders
• Savings for the insurance company

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Preliminary surveys

• Two opposing positions emerged
• The black box is expensive, invasive, violates
  privacy, insurance companies will use the device
  against policy holders
• The black box provides financial savings, above
  all if only a few miles are driven, and other
  advantages (assistance, locating vehicles, proof
  against lying witnesses)

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Behavioural Customer segmentation

• In favour (35.7) those most disposed towards
  the black box who do not agree with the
  statements highlighting the fears that could
  emerge, in particular the fact that insurance
  companies might use the device against policy
  holders. This group consists of people least
  involved in claims during the previous year.
  Almost a quarter are pensioners and more than
  half live in southern Italy.
• Against (42.3) the largest group, not
  particularly fearing invasion of privacy but
  indifferent to the potential benefits. This group
  consists of people owning more expensive cars
  than people in the other clusters and 14 were
  recently involved in a claim. The people in this
  group also had a high level of education.
• Sceptical (22.0) A potentially negative
  position although less insensitive to the
  possible advantages compared to the against
  group. This group consists of people who are very
  sceptical of insurance companies. They suggest
  that the box might be used against them and fear
  continuous control and invasion of privacy.

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Main economic aspects

• Possible savings for the company
• Reduction in the frequency of claims due to
  self-discipline
• Reduction in the frequency of claims due to
  ascertainment of liability
• Less outlay for whiplash neck injuries
• Lower costs for surveyors and assessment
• More stolen vehicles found
• Costs paid by the system (device rental)
• Effect of pay per use tariffs on good drivers set
  off against traditional tariffs

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Experiment

• 3000 Uniboxes are to be installed
• 2500 cars
• 500 lorries
• All the costs will be covered by Unipol but there
  are no discounts on policy prices
• The experiment will last for one year for each
  vehicle

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Travel data

• The following are detected for each vehicle
• The total number of kilometres travelled and the
  total time the unit is switched ON
• Kilometres travelled in terms of
• Day of the week
• Day / night (0600-2400, 0000-0600)
• Urban / rural / motorway
• Geographical area
• Parking time in terms of
• Day of the week
• Provincial area

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Crashes

• Position, speed and acceleration are transmitted
  to the processing service centre in the event of
  a crash to reconstruct the dynamics of the
  accident and draw a graph

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Position finding

• The downloaded data are used to identify the
  speed and position of the vehicle immediately
  prior to and following the accident and to draft
  a map of the site

• The vehicle can be located or the route taken
  until the vehicle disappeared can be traced in
  the event of theft

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Immediate assistance

• In the event of a crash the Europ Assistance
  operating centre is also contacted and personnel
  from this centre telephone the motorist and
  notify the breakdown truck service as necessary

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Technical knowledge objectives/1

• To obtain precise distance data
• To assess the correlation between route,
  distance, number of claims and other risk factors
  (e.g. power)
• To define a pay per use tariff

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Technical knowledge objectives/2

• To assess the efficacy of the satellite position
  finding system to locate vehicles in the event of
  theft
• To assess the utility of the black box in
  reconstructing accident dynamics and
  compatibility with damage declared (reduction in
  fraudulent claims)
• To assess active assistance functioning
• By telephoning the motorist after a crash
• By sending someone to the crash site in the event
  of a serious accident

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Technical knowledge objectives/3

• For lorries
• To measure times and distances
• To understand operating problems
• Faults, false alarms, functioning defects
• More work for agencies, management of a more
  complex contract

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Initial Results

• 2,600 Uniboxes have already been activated
• The 2,200 cars have travelled 19.5 million km
  (1,340 years of observation)
• Mean distance travelled is equal to 14,500 km per
  annum

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Mileage and claim frequency
Mileage and claim frequency
25,0
45,0
40,0
20,0
35,0
30,0
claims per million kilometres
15,0
25,0
chilometri
claims per year
20,0
10,0
15,0
10,0
5,0
5,0
-
0,0
-5000
5000-
10000-
20000-
30000-
40000-
50000-
10000
20000
30000
40000
50000
annual mileage
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Conclusions

• The experiment has been extremely interesting as
  it makes it possible to obtain a great deal of
  statistical information for processingtraditional
  tariffs
• The large-scale development of pay per use
  tariffs seems at present difficult in view of the
  economic aspects and the psychological resistance
  of the customers