The revolution that did not happen: Telematics and car insurance in the 2010s

Abstract

Attempts to use Big Data to transform car insurance pricing in France have failed. Why? Three possible explanations are discussed: organisational and cognitive inertia, normative preventions, and deliberate strategy. This article finds that moral or political reluctance has played only a secondary role in the failure of telematics devices. More important has been the deployment of an experimental strategy that has resulted in the conclusion that in the short and medium term at least, the use of big data to rate car insurance is not profitable. There are too many organisational and cognitive barriers to the smooth adoption of innovation. All insurers note they all arrived at this conclusion. An implicit consensus therefore remains to retain the old business model.

Unmasked: A History of the Individualization of Risk

“… 41 Note that the “individualization of risk” in the insurance context involves the finer and finer segmentation of risk classes, not an abandonment of classification altogether, as is sometimes implied in discussions of “personalized prices.” A full individualization of risk—in which each person actually receives their own unique price—was not technically feasible in insurance markets during the period of time (i.e., 1980s and 1990s) considered in this article. Predictive analytics and machine learning have brought this goal closer, but the insurance industry has been slow to adopt fully individualized pricing for both technical and cultural reasons (see Barry 2020; Barry and Charpentier 2020; Cevolini and Esposito 2020; Francois and Voldoire 2022; Krippner and Hirschman 2022; McFall 2019). …”