In November of 2016, the insurance giant, Allstate – which many of our readers most likely know from their “Mayhem” advertising campaign – launched a new startup technology firm called Arity. Utilizing Allstate’s decades of insurance data and information – coupled with advanced intelligence from telematics solutions – Arity is now poised to revolutionize the auto insurance industry.
Traditionally, auto insurance policies have been priced on risk, which has been identified via driver demographics. For example a single, male driver under the age of 25 would most likely have higher insurance rates than a 35 year old, married male driver with two kids. This would be based on accepted knowledge, conventional wisdom and actuarial tables that all say that a younger male driver without a family tends to drive more aggressively.
Unfortunately, this isn’t always accurate. We all probably know some young, single drivers that are extremely cautious and very safe. And we probably know some older, married drivers that perpetually drive like the cops are chasing them. At the end of the day, risk assessments and – ultimately – policy pricing were really just good guesses that could only take demographics and previous driving records into account.
Arity has a better idea. The company wants to use that data at their disposal to not only better assess risk and price policies, but to also make driving safer for everyone. To learn more about just how the company plans to accomplish this, we sat down with Katie DeGraaf, the Director of Product – Insurance Solutions for Arity, who is responsible for developing and overseeing the product strategy and roadmap for Arity’s Insurance Solutions segment.
Here is what Katie had to say:
Insurance Tech Insider (ITI): Arity came to market in a very interesting way – as a company created by Allstate. Can you tell our readers a bit about Arity’s founding? How and why was the technology developed by Allstate? Why was the company created?
Katie DeGraaf: Allstate knows that, in its current form, transportation is broken. For instance, there are 240 million vehicles out there only being used four percent of the time, and we collectively spend 8 billion hours a year in traffic. This dysfunction costs us $4 trillion every year, and worse, more than 40,000 people were killed in vehicle accidents last year, the highest in almost a decade.
There is a huge, untapped opportunity to improve the system and create broad-based economic prosperity for millions of Americans. A 20 percent improvement in cost structure and efficiency in the transportation system could result in $250 per month in savings per American household. That adds up to approximately $3,000 a year. For those with an average household income of $62,000, a 5 percent increase would be significant.
Allstate is committed to helping deliver this economic benefit to consumers. Just one example is Arity, which is focused on making transportation smarter, safer, and more useful for everyone.
Arity entered the market in 2016 initially to provide the insights that can help insurance companies better understand risk and more precisely price insurance. But we quickly realized we know a lot about how people move from one place to another and can leverage these insights across the entire transportation ecosystem to make it better for everyone.
Arity was founded to build upon everything Allstate knows about driving behavior and the nuances of how people get from one place to another. This puts us in the best position to shape the future of mobility.
The Arity Platform is built on more than 30 billion miles (and counting) of historical driving data from more than 1 million active telematics connections and eight years of collecting data directly from cars. In addition to a large and unique data set, we have more than 85 years of insurance data, risk modeling expertise, and a deep understanding of drivers, their claims and behaviors, courtesy of our connection to Allstate.
ITI: What did the insurance underwriting process look like before Arity? What does it look like with Arity? How can this help insurance companies?
Katie DeGraaf: Currently, underwriting and pricing for insurance carriers are based on proxies of risk – demographic factors that correlate with loss propensity – such as age, gender, credit history, marital status, zip code, etc.
With Arity’s telematics, insurance carriers can really understand the true risk of each driver. They will learn how, how much, when and where a driver is driving; this reduces reliance on proxies.
Arity provides insurance carriers scores for their customers that describe the riskiness of each driver. They can use this score in their underwriting to more accurately price based on this exposure. In addition, Arity’s solutions provide a relevant consumer experience with insights that can empower people to actually drive safer, among other benefits.
Our comprehensive solution helps insurers at every turn – from data collection and scoring to streamlining rating and reporting. We design interlocking pieces to make it easy for insurance carriers to launch and implement telematics-based insurance.
ITI: What different data can Arity’s solution help an insurance company generate about a policy holder? How is this data generated?
Katie DeGraaf: Arity offers a suite of technology options for insurance carriers to understand how their policy holders are driving. We offer an OBDII device, smartphone app, SDK and tagged solution (an aftermarket device that pairs with the app). We can also leverage other sensors a driver or insurer might have such as the car itself or location-enabled apps.
From these sources, we can capture meaningful data that powers more precise pricing and a meaningful customer experience. Examples of the data gathered include how, when, where and how much a driver is driving, weather, activated car features (i.e. windshield wipers were on at time of accident) and looking at specific behaviors such as hard braking, speeding and aggressive cornering.
ITI: With that much granular behavioral data being generated about policy holders, security must be a concern. How does Arity ensure that user data is secure and that insurance customer privacy is protected?
Katie DeGraaf: We take security and privacy of data very seriously. We use a variety of physical, technical and administrative security measures that help to safeguard personal information from loss, misuse, alteration, destruction, theft, or unauthorized access or disclosure.
ITI: Is Arity’s benefit only to the insurance company, or can the policy holder also benefit from Arity’s solution? How can policy holders benefit from their insurer implementing Arity’s solutions?
Katie DeGraaf: Arity benefits both the insurance carrier and the policy holder. The insight we provide is information that the policy holders didn’t have before. Currently, drivers don’t get feedback on their driving after they end driver’s education (aside from the backseat driver). Our insights help them to become better drivers.
For example, our distracted driver component provides important awareness to the driver. It will show them how often they’re handling their device while driving no matter what the reason.
ITI: Arity’s President was recently interviewed at CES, where he talked about some of the ways Arity’s solutions can help usher in other futuristic trends, including ride sharing and driverless cars. What role can Arity play in enabling and driving these trends?
Katie DeGraaf: Our unique understanding of driving risk can enable ride share, car share, municipalities and car companies better understand the risks on the road. With Arity, ride and car share companies can better manage risk to improve profitability and city planners can understand how people shift between modes of transportation and how these shifts make broader impact.
Until full autonomy is realized, our roads will be full of drivers interacting with smarter cars – either within their own vehicle or other vehicles on the road. Arity’s highly predictive models can help automotive partners predict and reduce accident risk and inform drivers – machine or human – of safer routes to their destinations.