Cambridge Mobile Telematics, which helps insurers monitor drivers via smartphone, has agreed to buy TrueMotion, a cross-town Boston rival, for an undisclosed sum. Both companies have shot to the front of the burgeoning effort to use technology to better manage — and price — driving risk.
The tappable, binge-able dopamine-distributing smartphone, increasingly the scourge of highway safety, has quietly been co-opted for safety. The purchase will combine telematic services for 21 of the largest U.S. auto underwriters, including Progressive Corp., GEICO and State Farm.
“These are very, very difficult problems we’re attacking,” said Hari Balakrishnan, CMT co-founder and chief technology officer. “There are certainly ideas that one group does better than the others … what our customers and partners will get are the best ideas brought into products.”
Balakrishnan founded CMT in 2010 with fellow Massachusetts Institute of Technology professor Sam Madden and current CEO Bill Powers. The professors had been sticking sensors onto flip phones for three years before the iPhone came along and drastically simplified their mission. At first, the pair looked to build a business on road maintenance or traffic tracking.
Two years later, TrueMotion spun up a few blocks away at the Harvard Innovation Lab. In short order, both companies set out to manipulate GPS data from drivers’ phones to identify speeding, distraction and hard braking (more recently they’ve been able to detect accidents and dispatch roadside assistance). The concept, when linked to risk profiles, quickly gained traction with insurers who were eager to parse potential liabilities beyond the relatively crude data points they had long relied on: age, sex and zip code.
TrueMotion raised $10 million in venture capital in 2015, the same year it won a coveted contract from Progressive. Three years later, Cambridge Mobile Telematics raised a $500 million investment from SoftBank. Berkshire Hathaway only incorporated telematics at GEICO in 2019 and lamented the decision. “On the issue of matching rate to risk, GEICO had clearly missed the business and were late in terms of appreciating the value of telematics,” Ajit Jain, the company’s vice chairman of insurance operations said at its annual meeting in May.
For general consumers, usage-base insurance has mostly been offered on an opt-in basis, with a potential discount for good behavior rather than a vehicle for penalizing reckless habits. The same technology that powers Pokemon Go, keeps eyes on the road and 7,000-pound SUVs out of bike lanes. CMT says that close to 40% of drivers with the option choose a usage-based insurance policy, depending on how it’s presented. Those who know they are being watched also improve their driving by about 40%, according to the company.
“The improvement is across the board,” Balakrishnan said. “If you take the worst 10% of drivers and improve them by even a little bit, that means a dramatic improvement in crashes and major savings for them and society at large.”
Though the timing for telematics technology is favorable, its progress seems to be overrun by increasingly bad driving habits. In 2020, traffic fatalities in the U.S. surged to the highest level in 14 years, as 38,860 people died in car accidents, including a preponderance of cyclists and motorcyclists. Some 16% of those casualties were pedestrians.
In time, the carrot of usage-based insurance could become a stick, particularly for fleet managers looking to cultivate safety among thousands of truck-drivers, delivery staff or ride-hailing contractors. Cambridge Mobile Telematics estimates the market for its services could swell to $125 billion market by 2026.
Going forward, the combined company will also look for growth via driverless vehicles. In theory, its data should make for more accurate sensors and help artificial intelligence algorithms make better decisions. Robots, it turns out, need chaperones too.
–With assistance from Giles Turner.
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