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Telemetry: Technology Craze or Business Enabler?
Jonathan Hopper is Smart421's Technology Director
Machines and technologies: created to make our lives easier, but all too often the source of stress and raised blood pressure. Machines go wrong - bits fall off them; parts fail; connections break. That's when wonderful pieces of new technology are transformed into piles of scrap metal and become a problem. The greater society's reliance upon machines, the more their failure leaves us with egg on our faces; and the greater commercial organisations' reliance upon machines, the more their apparently temperamental shortcomings can lead to dissatisfied customers, broken service level agreements and even litigation or regulatory action.
Wouldn't it be nice, then, to have a crystal ball that tells us when the machines we rely on most are going to go wrong. Indeed, from an underwriter's perspective, wouldn't it be reassuring to know that the aeroplane you're about to go on risk for, will actually know when a critical engine component is going to fail before it actually happens, or that a stolen piece of plant machinery is currently in a car park in East Grinstead.
The good news is that this technology does exist and it's beginning to have a real impact on industry and commerce in the UK, although most underwriters would be unaware of it. Telemetry is one of those words we might know from sci-fi and military films, and we probably have a vague sense that it's something to do with getting information from a machine. In reality telemetry - or telematics - is the integration of communications, vehicle monitoring systems and location devices. It allows information to be transmitted from a remote device such as vehicle while effectively turning them into intelligent systems using sensors and two-way wireless communications.
During the last decade, telemetry has been advancing by leaps and bounds. In simple terms, telemetry is the capability to transmit or retrieve data over long distance communication links such as satellite or telephone lines. The tracking of a stolen vehicle's location is probably the most well-known application for this sort of technology at the moment, but it represents just the tip of the iceberg in terms of the full potential of telematics.
Telemetry is increasingly being adopted across European industry to aid companies in improving service levels and gaining a greater understanding of their customers. For example, Bombardier Transportation (UK) - a manufacturer of railway rolling stock and equipment - uses a telemetry system to remotely monitor its rolling stock on UK's railways. This enables Bombardier to gather detailed information on each rail vehicle for its customers and ensures that service problems can be diagnosed or fixed in a shorter period of time. This means rolling stock is back in service as quickly as possible.
The system is implemented, hosted and supported by Smart421 and collects information on a range of indices such as oil levels, passenger weight loads and location. With the telemetry system in place, Bombardier can improve on its maintenance contracts and reduce on-going train maintenance costs for UK train operating companies. These savings, and the associated improvement in performance, can be passed from train operators to their customers in terms of more reliable service.
Another current application for telemetry is to track fleets of cars - monitoring mileage and determining vehicle location. Especially relevant to the insurance industry, this means that stolen vehicles can be accurately located and reunited with their owners, mitigating risks and protecting underwriters' claims ratios. Furthermore, roadside assistance can be improved: knowing a vehicle's exact location can reduce response times and ameliorate customer service.
In terms of taking the first steps in the use of telemetry to inform underwriting decisions, Norwich Union (NU) has taken the lead by exploring the potential of mobile monitoring in car insurance. NU's aim is to offer its customers more flexible products and prices based on vehicle usage in terms of mileage and times of use. Gavin Keeley, NU's Head of Technology, Architecture and Design believes that using telematics to monitor car usage has very clear benefits for both for underwriters and customers. Gavin recently went on record as saying: "The technology solution we are developing is now so advanced that it can be used to enable more accurate risk management and policy pricing. Particularly applicable to current high-cost user groups - for example young drivers - real-time information would base insurance premiums on actual car usage rather than statistics, creating the potential for removing penalties on high-risk driver groups. It could be equally beneficial for low-user groups where car usage is very infrequent."
NU's confidence in the new technology is clear - and where NU goes, other insurers are sure to following. The advantage of using telemetry to aid underwriters to understand their customer base means that, ultimately, insurers will be able to provide more personalised service. But telemetry is not just about monitoring things that move: tracking fixed assets - for example named contents on an insurance policy using a relatively cheap device such as a Radio Frequency Identification (RFID) tag - would not only prevent fraudulent claims, but also enable repatriation of recovered stolen goods. Allowing customers to electronically tag goods to link them to themselves through policies would not only give those customers increased peace of mind, but could save underwriters significant monetary outlay in replacing recovered stolen goods that, currently, they have no way of reuniting with their owners.
Underwriters could also tap into a wide range of data to provide new services by monitoring and assimilating data collected by sensors in potentially dangerous manufacturing or processing environments. This information could be used to increase the accuracy around the compliance of insured customers; help assess and manage an insurer's risks and even prevent accidents from occurring in the first place.
There's no doubt that wireless technology can help the insurance industry improve its understanding of customers, manage risks and enable increasingly accurate policy pricing. However, as the technology matures and becomes more accessible, it is important to understand the implications of implementing and integrating it with existing business processes. How much and what to monitor? Most relevant to the insurance industry, however, will be the level of data collected. Companies will face the problem of not only integrating effectively, but of storing and disseminating the raw data they collect and turning it into useful information. It is essential, therefore to know what it is a company wants to achieve - before going ahead and jumping on the technology bandwagon.
Certainly any business introducing telematics has a number of hurdles to clear in order to make it work to the fullest of its potential, but mobile monitoring is already starting to bring significant benefits to industry. That's why insurers need to understand this technology and its potential impact on risk management and underwriting decisions. As telemetry matures, sensors and wireless costs are decreasing while connectivity and coverage capabilities mean that getting data on the move is becoming easier and cheaper. All the factors are in place to generate a huge growth in the use of telemetry in the next 5-10 years.
So the next time a machine tells you "I'll be back", don't worry. It's not a threat, it's just telemetry.
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