How big data analytics redefines the risk landscape

10 December 2020 Gareth Stokes

Continued advances in big data analytics mean that motor insurers will increasingly shift the responsibility for risk mitigation to your commercial clients. They will expect you, the country’s non-life insurance brokers, to work closely with your clients to evaluate, identify and mitigate on-the-road risks in real time. This emerging reality became apparent during the virtual launch of the Netstar Connect Report 2020/21.

The big data age is upon us

One of the clearest indicators that we have entered the big data age is that insurers and telematics firms are now able to retain and process all of the data they collect. Netstar, which is acknowledged as a pioneer of telematics and related technologies in South Africa, says that its connected vehicles generate approximately 240 million data points every day. A decade ago, the firm would discard up to 70% of this data due to processing and storage constraints; nowadays it stores all of this data for deep analysis using a combination of artificial intelligence (AI) and machine learning. Big data creates opportunities for insurers and fleet managers alike. 

Victor Radebe, CEO at Mzansi Aerospace Technologies observed there was an ongoing shift from the insurer to the insured insofar responsibilities for risk management and risk mitigation. The data collected from telematics and other connected devices installed in vehicles is assessed in real time using advanced data analytics and AI to offer a range of risk insights. For example, prescriptive analytics allows insurers to work with telematics providers to suggest behaviours that will reduce policyholders’ risk profiles. The result is variable insurance premiums that depend on driver and management behaviour across a vehicle fleet. Another example is predictive analytics, which involves pattern analysis to predict and prevent loss events. This technique can be used to significantly reduce the eventual risk transfer via insurance. “Data is the new order; but I would like to add a caveat to this notion, being that data is only useful once subjected to rigorous analytics,” said Radebe. 

Behavioural insights

The Netstar Connect Report 2020/21 shares conclusions about human behaviour during lockdown and pandemic based on data produced by more than 300 000 connected vehicles. A close analysis of this data helped to answer questions about how South Africans behaved through lockdown; what the future of driving looks like; and how the Internet of Things (IoT) will shape cities. Lindile Xoko, Netstar Executive: Sales, noted that citizens showed admirable compliance with lockdown regulations over a period spanning seven months. Around 23 March, just days before lockdown, there was a noticeable spike in interprovincial travel as migrant workers and urban professionals returned to their homes to observe the lockdown.

“From that point onwards the movement of private vehicles stopped almost totally,” said Xoko. Lower income areas showed the highest vehicular activity during lockdown due to a combination of fewer local retail outlets and the prevalence of retail workers in these communities. Another interesting revelation was that retail addresses showed spikes in activity in the morning hours and in the late afternoon; by 6pm people had finished their shopping. This trend has remained post-lockdown. Lockdown had a huge impact of the crime statistics monitored by Netstar. Incidences of armed robberies, hijackings and home invasions were down a staggering 71.8% in April compared to March 2020 as restricted movements curtailed criminal activities. The data confirmed a close correlation between movement and criminal activity. 

12 Million vehicles and counting

The report launch offered insights into the size of South Africa’s motor pool, something that non-life insurers are always concerned with. Netstar said there are an estimated 12 million vehicles on our roads, of which around 6.8 million are passenger vehicles and the balance light or heavy commercial vehicles. It is estimated that 30% of the total vehicle pool have a telematics device installed, or around 3.6 million, of which around 22% have Netstar devices. “Our 2020/21 report is based on 300 000 vehicles, national in geography, and a significant enough sample to be representative of the trends in the country during lockdown,” said Xoko. The group has more than 1.3 million active devices in circulation in South Africa presently; there can be more than one device in a vehicle. 

Pierre Bruwer, CEO at Netstar, said that the ongoing push to install high connectivity solutions in vehicles was being driven in partnership with Toyota and Vodacom. “We have about 120 000 vehicles with high connectivity and have a contract with Toyota to fit another 600 000 vehicles over the next four years,” he said. Installing broadband capabilities in vehicles makes a huge difference to both commercial and private users. “Telematics in the commercial vehicle space started off with a simple case of dots on a map; but quickly led to more advanced applications such as route planning, route optimisation and route adherence,” said Francois Stols, Netstar Chief Technology Officer. 

Striving for continuous improvements

Fleet managers use in-vehicle sensors to monitor cabin and engine data and receive real time information on vehicle location. They can also view and analyse video feed from cabin cameras. This data allows them to make continuous improvements to driver behaviours to deliver improved safety and operational efficiency. An example of predictive analytics in action stems from its use in steering truck drivers away from potential hotspots in real time. “Bi-directional connectivity means that the driver becomes part of the fleet management ecosystem; the fleet operator can push data to the driver, whether this information is about consignments or route changes, and these can be displayed in the vehicle … the driver can then provide data back to the control centre,” said Stols. 

The pandemic has put the world in fragile state. Organisations seeking a competitive advantage will have to reinvent, renew and optimise their business models to differentiate from their competitors. Technologies such as connectivity and the IoT give businesses the edge. Bruwer suggested that future-fit fleet management solutions would focus on optimising fleets from a cost per kilometre perspective by choosing the most economical and safest routes. “We have excelled at supporting our insurance partners in mitigating and managing the risks in and around their fleet customers and have created a behavioural platform that allows them to have real conversations with their customers,” concluded Bruwer. “We help them to respond to loss events quickly and to achieve faster turnaround times on claims”. 

Writer’s thoughts:
The application of big data analytics in risk mitigation reminded me of an observation made by South Africa’s largest insurer a couple of years back. They said that the future of insurance lay in risk mitigation rather than risk transfer. Do you believe that the widespread adoption of technology will contribute to an improved non-life insurance claims experience? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].

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