Picking the right telematics data collection technology for your auto insurance programs can be an overwhelming task, but there are simple ways to narrow down your options. Start by evaluating these OBD device data collection advantages and challenges.
In the current usage-based insurance (UBI) market where increasing penetration of smartphones seem to be trending, telematics solutions based on OBD still dominates and helps boost auto insurance industry profitability, improves driving behavior and provides dedicated, secure connections between a vehicle and the back-office server consolidating the data (whether located at the insurer’s site or a service provider). The OBD connection ensures positive vehicle identification.
It also clear that OBD telematics devices reduce the possibility that the insured party will turn off the data collection at any stage and identifies those time periods when the device is disconnected. This is a necessary requirement for many state insurance regulators and insurance carriers.
The table below shows the advantages and challenges associated with OBD telematics solutions:
|OBD DEVICE ADVANTAGES||OBD DEVICE CHALLENGES|
|Uniformity: Using OBD-II ensures that the data collected will be fair and unbiased across all demographics, vehicle types, vehicle uses, and drivers.
Insured drivers within this type of program will be treated equitably, and measurements will use equivalent values.
|Limited to a single port: Each vehicle has only a single OBD port that supports only one device at a time. Fleet providers, road-charging entities, and consumer applications have introduced special-purpose add-ons using this port.
These add-ons could compete with availability for telematics applications unless a service provider can deliver both telematics and the additional service.
|High reliability providing accurate vehicle identification and trip detection: Solutions based on OBD hardware are highly reliable, using proven methods to establish the necessary vehicle-to-insurance carrier connectivity. Data is transmitted to the insurer quickly and accurately.||Higher hardware costs: Dedicated cellular-based OBD solutions have a higher operational cost for the hardware plus cellular service. Costs can be reduced by adopting OBD with Bluetooth, but the expense is still higher than with less permanent solutions, such as smartphones. Hardware costs are diminishing as design improvements are made, but they still represent a potential obstacle for insurers seeking telematics at the lowest possible cost based on program needs.|
|Value-added services: Integration with internal vehicle information opens opportunities to provide value-added services, such as maintenance reminders, roadside assistance, crash notification, and more. Services can be integrated with the vehicle itself (such as automated roadside assistance or captured collision data).||Vehicle compatibility concerns: OBD availability is limited to light duty vehicles manufactured later than 1995 in North America, and light duty vehicles later than 2000 in Europe. There are still a few vehicles, particularly in areas outside of North America, that do not fit into these categories and may not have an OBD connection port.|
|Exceptional security: The nature of an OBD hardware-based solution minimizes possibilities for fraudulent acts and eliminates the potential for individuals to circumvent the monitoring system. Many solutions immediately detect the deliberate removal of the OBD device.||Policyholder installation and adoption: If enrollments are not managed carefully and closely, policyholders may become hesitant to install hardware into their car due to lack of familiarity with the new technology compared to consumer-accepted smartphone practices.|
|High accuracy: This solution delivers exceptional mileage accuracy for programs that require that tracking data.||Requires driver ID for multi-user applications: In scenarios where autos are shared, a driver ID mechanism must be used to accurately implement the insurance program..|