The dream of a self-propelled vehicle dates back at least to the 1700s, with the desire to find a more reliable means of transport than through horse or human power. By the 1800s, the steam engine helped establish a true automobile that was considered state-of-the-art until a new arrival—the internal combustion engine—showed the boiler had run out of steam. The 21st century appears to have perfected a fully electric vehicle, bringing another solution to the age-old challenge of how best to power ahead.
And yet, whatever the advances in propulsion, today’s drivers still travel in largely the same wheeled box as three centuries ago. So what’s the next path forward? The development of the automobile suggests that innovations aren’t always entirely new creations and sometimes arrive after rethinking the existing technologies, methods, or institutions. “Most innovations,” noted Peter F. Drucker, author of the classic The Practice of Management, and “especially the successful ones, result from a conscious, purposeful search for innovative opportunities, which are found only in a few situations.”
At Verisk, we’re both conscious and purposeful about finding opportunities in our daily work, and that can only help build a stronger culture of innovation. Verisk has long been an archive of claims data and a laboratory for predictive analytics. So, recently, when advanced telematics devices began to be installed in cars, we took notice—and sensed the birth of an innovation.
Since the mid-1990s, technology has been sending measurements of a connected car’s movements and location back to the automaker. Beyond the use of diagnostics for engine maintenance and emergency communications for the driver’s safety, was anything being done with that trove of information? We at Verisk saw fertile ground for innovation. What if insurers could have a reliable window into a driver’s road behavior as well as the car’s performance data? What effects could there be on auto insurance rates?
Combining Verisk’s strengths as a data archive and analytics lab, we came up with an idea known as the Telematics Data Exchange™. The exchange is an open marketplace of driving data that has been provided by automakers, telematics service providers (TSPs), and Internet of Things (IoT) providers with the consent of consumers. Through the exchange, insurers now have a single and efficient access point to a wealth of driving data. Verisk’s exchange complements solutions developed by insurers starting their own usage-based insurance (UBI) coverage programs.
In using the exchange, participating insurers now have a view through that “reliable window” and will be able to rate drivers more accurately based on their driving habits and behaviors. This is a bold step in establishing UBI, a concept that will reward safer drivers and lead to fairer pricing—including lower rates for the safest drivers—in the marketplace.
Without the Telematics Data Exchange, a translation of automaker data into actionable insights for insurers would be difficult or impossible. We believe that Verisk’s exchange provides what Peter Drucker referred to as a special development that can endow “existing resources with enhanced potential for creating wealth.”
In an influential essay, “The Discipline of Innovation,” published in Harvard Business Review in 2002, Drucker explained the notion further: “Effective innovations start small. They are not grandiose. It may be to enable a moving vehicle to draw electric power while it runs along rails, the innovation that made possible the electric streetcar. Or it may be the elementary idea of putting the same number of matches into a matchbox (it used to be 50). This simple notion made possible the automatic filling of matchboxes and gave the Swedes a world monopoly on matches for half a century.”
He continued, “By contrast, grandiose ideas for things that will ‘revolutionize an industry’ are unlikely to work.”
In Drucker’s essay, electricity and the streetcar were already in existence before they were fused with a creative insight. The innovator was able to work with the reality at hand—and then advance that reality. The same holds true at Verisk, where our company’s core competencies power the workings of the Telematics Data Exchange. At the root of our business is a very intimate relationship with customers. A deep understanding of our customers’ needs is fundamental to developing innovative solutions that meet customers where they’re going to be in future. We’re a company that assembles large amounts of unique data and then wraps decision support analysis around that data.
As a case in point, the Telematics Data Exchange serves insurers, automakers, and consumers by bringing order, standards, and ease of use to the telematics field. Insurers are suddenly able to access auto and driver data in the United States without investing in telematics technology and logistical support. Automakers are helped in unlocking the economic value of connected-car data. Consumers who demonstrate safer driving behaviors are likely to see their auto rates fall. How’s that for well-rounded innovation?
Those observing the advances in telematics have also anticipated the market’s progress toward UBI, an exciting insurance concept in which the driver pays as he or she goes. Verisk’s Telematics Data Exchange is likely to accelerate the shift to UBI, since it hasn’t been practical in the past for automakers to connect customers’ driving data to multiple insurers. The exchange can take away operational hurdles and make the free flow of information more feasible, starting from an individual car on a particular highway and back to the vehicle’s insurer.
How quickly will drivers warm to UBI, and when will insurers experience a definitive pull in that direction? Again, the wisdom of Peter Drucker comes to the fore. “In fact,” he wrote in his 2002 essay, “no one can foretell whether a given innovation will end up a big business or a modest achievement.
“But even if the results are modest, the successful innovation aims from the beginning to become the standard setter, to determine the direction of a new technology or a new industry, to create the business that is—and remains—ahead of the pack.”
Drucker found that innovation tends to be chiefly “work rather than genius.” He concluded that it also usually has something to do with ambition: “If an innovation does not aim at leadership from the beginning, it is unlikely to be innovative enough.”
At Verisk, we stimulate innovation fundamentally by asking for it. We ask questions in a couple of categories: Is the idea actually innovative? What else is available in the market? And is our idea really unique? If we can combine our innovation at an early stage with a customer in the lab, it brings confidence that what we’re developing will ultimately become meaningful to others. We’ve discovered that innovation is often part adaptation, while acceptance and success are largely dependent on collaboration. Although innovation is a process that doesn’t necessarily have to be expensive, it does need to be incisive or—as practical visionaries have suggested—a creative rethinking of the reality at hand.