Over the past few months, there have been countless reports about smartphones tracking the movements of Americans. As Robert Lee Hotz discusses in his article The Really Smart Phone, published in April 2011 in The Wall Street Journal, Apple and Google have come under increasing pressure for monitoring their customers without their knowledge.
But shelving privacy concerns for the moment, the ability to track the movements of a cell phone or other mobile device offers some interesting possibilities for auto insurers. For example, if an insurer can persuade customers to give permission for tracking (in exchange for significant premium discounts), then the resulting information could help the insurer detect and prevent potential insurance fraud. If a driver reports that a loss occurred in, say, Camden, New Jersey, and the tracking from a smartphone proves that the driver was never in Camden, then the company can automatically flag the incident for review as a questionable claim.
Needless to say, additional conditions and restrictions may make such an event more complex. For example, an insured might leave his smartphone at another location on the day of a loss. Or another driver might borrow the car and cause a loss. There is also the potential for an insured to report a loss that occurred somewhere other than where it did — and then to drive to that place after the loss. The date and time stamping feature of the tracking device will be critical to the success of such a system.
Unlike an Event Data Recorder (EDR) mounted in a car and monitoring its status before, during, and after a crash, a smartphone can show only if the device was where the owner said it was at the time of the reported accident. Still, even that limited information may be enough to discredit a fraudulent loss report.
By getting permission to track its customers, an insurer could learn a surprising number of things. For starters, the company could verify that the address listed on the policy is where the owner actually lives. If the vehicle is registered in rural Ohio, for example, then why does the insured’s cell phone spend every night in Philadelphia?
Beyond that, over time the tracking device may show that the vehicle spends a lot of its time in a geographic area with potential for auto theft. The insurer might be able to adjust the premium to reflect the increased risk.
The dawn of the mobile tracking devices has arrived. Insurers that embrace this new technology will emerge with a healthier and more predictable book of business.