The Power of Real-Time Driving Data: Revolutionizing Insurance with Henry Kowal of Arity

On the latest episode of Risk Management: Brick by Brick, Jason Reichl is joined by Henry Kowal, Director of Product Management at Arity, a technology company spun out of Allstate in 2016.
 

In this episode, Jason and Henry explore how massive-scale driving data is transforming insurance pricing and risk assessment, making it more equitable through real-time behavioral insights.

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The Scale Revolution: Transforming Insurance with Real-Time Data

The landscape of insurance pricing is undergoing a dramatic transformation, powered by an unprecedented scale of driving data. Arity, with its collection of nearly 2 trillion miles of driving data and daily addition of 1.3 billion more miles, is at the forefront of this revolution.

This massive dataset, representing about 15% of the U.S. driving population, enables a fundamental shift in how insurance companies evaluate and price risk. Through partnerships with connected cars and mobile apps like Life360, Arity has created a network that provides real-time insights into driving behavior.

"We collect about 1.3 billion miles of driving data every day... that's about 15 percent of the U.S. driving population."

The implications are significant. Traditional insurance pricing often relies on proxy measures like credit scores, education levels, and demographics - factors that consumers have little control over. Arity's approach focuses on actual driving behavior, creating a more equitable system where safe drivers can receive immediate discounts of up to 25-30% when shopping for insurance.

Breaking Away from Traditional Models

The traditional telematics model requires a monitoring period - typically six months - before adjusting premiums based on driving behavior. Arity's innovation eliminates this waiting period by leveraging historical driving data, enabling instant pricing decisions that benefit both insurers and consumers.

This approach represents a significant competitive advantage. Insurance companies with access to this real-time data can price risks more accurately, while those without it face the challenge of adverse selection - potentially taking on higher-risk drivers without appropriate pricing.

"It's based on an actual measure of driving risk. Things like credit, education, your gender, where you live - those are just proxies of risk. A lot of those, you as a consumer, you don't have control over that. Your driving, the way you drive, you have control over that."

Adapting to Changing Behaviors

The COVID-19 pandemic highlighted the importance of real-time data in understanding risk. While overall traffic decreased, those who remained on the roads showed increased instances of speeding and phone distraction. This shift in behavior patterns demonstrates why static snapshots of driving data are insufficient for accurate risk assessment.

Arity's analysis has also revealed interesting insights about self-selection bias in traditional telematics programs. Drivers who opt into insurance-based telematics programs tend to be safer drivers, creating an incomplete picture of risk. By gathering data from various consumer apps unrelated to insurance, Arity provides a more comprehensive view of actual driving behaviors across the general population.

Looking ahead, Arity is developing new products that will enable insurers to use these aggregated insights for territorial pricing, offering near real-time data on risk trends down to the ZIP code level. This innovation could revolutionize how insurance companies segment and price risk across different geographical areas.

To find out more about transforming insurance through data, tune in to this episode of Risk Management: Brick by Brick.

Apple Podcasts: https://apple.co/49jr5GR 

Spotify: https://spoti.fi/49pLv0D 

Podcast Host: Jason Reichl 

Executive Producer: Don Halliwell

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