Data and Insurtech:

Fueling the Journey to

Artificial Intelligence
On the road
to AI? Don’t
underestimate
the importance
of your data.
Artificial intelligence (AI) is a
powerful, transformational force
and potential disrupter in nearly
every industry. We can see its impact
throughout our daily lives in things
as mundane as Netflix suggesting
what we watch next and as important
as our car automatically braking to
keep us safe on our trip across town.

Your data – both quality and quantity

- can make or break your artificial
intelligence project. It is critical that
you start your digital transformation
project by determining what data you
need, and what you want the data to
do for you and your customers.

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 Consumer Demand for:

The Digital Transformation +

In commercial insurance, finance, and
Faster Responses Online Self-Service
other industries where the value of
commercial vehicles is essential to
business decisions, the road to machine

=
learning and artificial intelligence is being
driven by consumer demand for faster
responses and more online self-service.
That means pushing basic insurtech or
fintech projects into the realm of AI,
where decisions on policies and loans Decisions on Policies and Claims made using:
are made using data, business rules,
and machine learning. It’s not always an
easy task when values fluctuate, markets
move, and demand ebbs and flows.

Data Business Rules Machine Learning

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Artificial
Intelligence
or AI
/,ärd ’fiSH l in’tel j ns/
e e
noun
def: a field, which combines
computer science and
robust datasets, to
enable problem-solving1
[1] Artificial Intelligence (AI).
Retrieved November 15, 2021.
What is Artificial Intelligence exactly?
One very straightforward and broad definition from IBM is that “artificial intelligence is a
field, which combines computer science and robust datasets, to enable problem-solving.1”
From this definition we see that there are three main components:
+ =
Data Computer Science Problem Solving
ee
There are additional subsets of AI, such as machine learning and deep learning, but at a high-
level these capabilities are all driven by data and all result in computing power enhancing or
substituting in for human decision-making.
While the world discusses self-aware machines getting ready to take down society because
of bad programming, the insurance industry is currently focused on first steps: deep learning
and machine learning that will lead to better policy and claims decisions.
They prioritize third-party data on vehicle specifications and value, mixed with telematics,
safety, and other data attached to specific vehicles, fleets and drivers. Companies need
systems that provide these data-based decisions to agents and consumers as quickly as
possible to meet competitive demands.
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 Specifically, for commercial vehicles,
Data: Fuel for AI that Delivers this means you must be able to:

To get to the decision-making and predictions that AI promises, Translate VIN numbers
one must of course have the technical capabilities to ask the right to specific makes or
models & specifications
questions, and the resources to invest in robust computer science
applications. However, none of this is possible without first having
the right data. The most sophisticated AI in the world will stall if it
isn’t fueled by robust datasets. Provide information
on option packages
The right data, cleaned and processed to meet the AI challenge, available

is often cited as one of the most important building blocks for any
insurtech or AI decision-making system.
Identify
While the importance of robust data may seem quite obvious, what incomplete
that actually looks like warrants some further examination. trucks

Three key components of what makes datasets robust are:

Provide weights & other
specifications based on
make/model info

Provide truck
Accuracy Completeness Timeliness bodies that fit on
incomplete trucks

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Accuracy
To be actionable, data must reflect reality. This is not
always as simple as it may seem, and all raw data will
contain some noise. Beyond just anomalies, however,
there are also some datapoints that are derived and
therefore rely heavily on the calculations or expertise
they are based on.

Proprietary data should be properly vetted to ensure it

has appropriate levels of quality control in place, and
external data should be sourced from reliable vendors.
It is important for data coming from third parties to be
unbiased since any bias in the dataset will skew future
decision-making. It is also important that the data is,
and will remain, consistent. Disruptions, delays, or
discontinuations of datasets happen, and important
sources should be bulletproof.

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Completeness
A complete dataset refers to both the volume of the
data as well as the variety of datapoints. Your data
solution needs both breadth and depth for your AI
solution to be properly trained and to appropriately
assess the accuracy of its own predictions. Having
too small of a sample size of what your data is telling
you or reporting will also cause bias.
When considering what data to gather, either
internally or from third party sources, it is important
to not limit the types of data too narrowly based
on past models or simply gut feelings. AI looks for
patterns in data to predict an outcome, so limiting
the scope of data may mean you are missing out on a
previously unrealized predictor. Of course, including
irrelevant data can be counterproductive. Leveraging
subject matter experts can be critical in determining
which datapoints are related to the topic and which
are likely to send you down the wrong path.
4 vs 20+
Basic Price Digests
Specifications Specifications
Beware Your Data Blind Spots
With regard to commercial truck specifications, we have
noticed that oftentimes insurance carriers are interested
in pulling the basics: original cost new (OCN), if the truck is
complete or incomplete, if the vehicle is a tractor, and weight
(gross vehicle weight or gross combined weight). In particular,
OCN and weight are key elements for carriers as they factor
into premium and risk for the vehicle. However, Price Digests
has more than 20 specs available for commercial trucks,
including variables specific to the vehicle’s axle and tires,
transmission, engine, and performance.
When considering what data to ingest for future AI
endeavors, it may be important to consider these additional
specs even if they do not have a role in current risk models.
Having blinders to previously untapped datapoints could
negatively impact an AI’s predictive power.
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 Subtype, Size Class Minimum OCN Maximum OCN OCN Variance

Example: Using Original Cost New

(OCN) for Insurance Conventional
As many insurance companies are using Cab & Chassis $156,976 $160,900 $3,924
7 (26001-33000 lbs)
OCN for determining insurance rates, the
accuracy of this number is important. By
using a lower value than the true OCN, the
Conventional
insurance company may be under-insuring Cab & Chassis $150,690 $165,950 $15,260
their customer and have to pay out more than 8 (33001+ lbs)
they were collecting in premiums. There is also
the opposite scenario. If the insurance carrier/
agent uses a value significantly higher than
Conventional
the true OCN, they will be charging too high of Day Cab Tractor $150,810 $170,530 $19,720
a premium for the insurance settlement. 7 (26001-33000 lbs)

A 2020 Freightliner Cascadia for example can

produce a wide variety of MSRPs depending on Conventional
the sleeper versus day cab configuration and Day Cab Tractor $128,571 $173,593 $45,022
multiple other specifications. With enough 8 (33001+ lbs)
detail provided through VIN decoding systems
and specifications databases, you can see
possible variances in the prices you assign to Conventional
assets and reduce the underwriting risk. Sleeper Tractor $129,909 $212,638 $82,729
8 (33001+ lbs)

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Timeliness
Data can be generated and delivered on a variety
of frequencies. Generally speaking, high frequency
data refers to data that is available more often than
monthly, perhaps in real-time or for the previous day.
Many data sources are updated less frequently than
that, though, and may be available weekly, monthly, or
even less frequently. As an example, the U.S. Census
Bureau conducts the national census once per decade.
Often, the timeliness of the data must be balanced
with the accuracy and completeness of the data.

Besides just the frequency of publication, however,

there is also time associated with the ingestion of
data. The most time dedicated to data ingestion is
typically at the onset when fields are being defined
and programming time is being spent to ensure the
data will align with data from other sources.

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 API vs. Flat Files
Data Delivery Options
When sourcing data from third parties,
there are typically two options:

APIs: An application programming interface

(API) is a more modern and dynamic method

200
for pulling in data. With this approach, third
Added Every

2
party data can be pulled in seamlessly to
existing systems. The data is always being API Users
pulled in directly from the source, which new commercial
Continuous
significantly reduces the possibility of having
truck models Weeks
outdated information. APIs are an appealing
choice for many reasons, but especially
because they do not slow down or impede
existing workflows.

4,600
Flat files: These are often data downloads Missed in
Flat File

1
in the form of .csv or Excel files. Depending
on the source, this type of file may require Recipients
actively going to a website and initiating a new commercial
download or may be delivered on a preset Once per Year
truck models year
cadence from the vendor. If the data is pulled
in at the same frequency as it is updated,
then there is no inherent drag on the
timeliness of the data. However, if data intake
and update frequencies are not aligned, then
the user will not always be referencing the
most up-to-date datasets.

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 !
Keeping Historical Data
Don’t Miss Out
on the Latest Data
Access to historical datapoints, such as ever-changing values, is also important
to many applications, as AI applications may use previous variables to look into In a typical year, Price Digests adds
the future. Models can be built on measuring the result of historic variables approximately 200 new commercial truck
and allow the ability to predict what similar behavior will result in the future. models to its database every two weeks.
For API users, those newly added models
While there is no hard and fast rule about how many months or years of are available as soon as they hit the
historical data will be needed to get an AI effective program started, generally database. For flat file recipients, those new
the more historical data available the better. The one caveat to the “more is models sit untapped until the user ingests
better” mantra is that it is only true as long as the data is also consistent with the file and updates their own environment.
current quality and methodology standards. If, for example, flat files were only ingested
once per year, that would represent 11.5
months—about 4,600 new commercial
truck models—worth of data that is missed
out on between ingestion cycles.

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 Having Good Data
is Important,
but so is
Understanding It
Once these three main components
of the data are addressed, there
is the added element of having
a thorough understanding of the
data itself. Having access to subject
matter experts to interpret the
data is always important, especially
when venturing into the world of
AI and allowing for automation in
some decision-making. Having a
deep knowledge of the data can
help ensure that the predictions and
decisions being made are reasonable,
ethical, and in line with a company’s
brand, image, and business practices.

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 Specific to the world of commercial
Completing the Truck auto insurance, we have observed
two areas where nuance in data is
very important and where some
carriers may overlook:

+ = Incomplete vs.
Complete Vehicles
When Price Digests conducts reviews
of insurance carrier books, there
is often one metric that surprises
+ = the carrier most: just how many
incomplete commercial trucks they
are insuring. In some cases, it has
been over 65% of the commercial
trucks insured by the carrier. Often,
this designation—and the implications
+ = it has—are not fully understood.

An incomplete truck is just a cab and

chassis, stripped chassis, or cutaway
van without a body or equipment

+ = attached. Incomplete vehicles require

customization before they can begin
their useful life. This customization
is specific to the unique needs of the
business and reflect the specialized
applications of the truck.

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Valuing the Whole Truck

The OCN for a completed truck can be,

and often is, dramatically higher than the
Tabs incomplete version of that vehicle. It is not
Easily add a truck uncommon to see OCN more than doubling
body to your cab
& chassis between the incomplete and complete
status. This is because the truck body
itself is often worth more than simply the
cab and chassis it is being affixed to.

Knowing the industry the vehicle serves,

such as within the construction, food
transportation, utility, or chemical
transport industries, can help narrow down
the most likely truck bodies that would be
upfitted to the incomplete vehicle. Having
an understanding of which bodies are
most likely to be used with the incomplete
Chart truck can give the carrier a better range
Visualize your for the actual OCN of the upfitted truck. To
truck’s value help our clients through this process, Price
changes over time Digests has developed Truck Body IQ™
Intelligence Solution. To learn more about
this innovative, data-driven solution,
click here.

Price Digests • Data and Insurtech • pricedigests.com • 14

Calculating GVW and GCW Gross Vehicle Weight vs.
Typical Configurations Gross Combined Weight
If a vehicle is in a collision, the weight of
that vehicle is directly correlated to the
severity of the crash. The heavier a vehicle,
Gross Vehicle Weight
the higher the chances are that the crash
will be more severe. This is why gross
+ + + vehicle weight (GVW) is a key spec that
insurance carriers collect and consider.
Heavy Duty Occupants Trailer Cargo
Tractor With tractors, the GVW only accounts
for the tractor itself, and not for the
trailer it will be pulling. Therefore, it is
= important that if a vehicle is identified as
a tractor, the insurance carrier pulls the
Gross Combined Weight gross combined weight (GCW) instead of
the GVW. The GCW accounts for the full
picture—the tractor plus the trailer. To
assist with this distinction Price Digests
provides an “is tractor” indicator to tell
Gross a carrier whether they should consider
+ + = Vehicle adding a trailer to their calculations.
Weight
Truck* + Truck Body Cargo Occupants In many cases, the difference between
these weights can be the difference
between a vehicle being classified as
heavy or extra heavy, which directly
*Heavy, Medium, or Light Duty
impacts its risk rating.

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 While use cases are often driven by customer behaviors, vehicle-driven risk factors may be
an interesting area to explore. Vehicle weight is one vehicle-specific risk factor that comes to
mind, but there are many other vehicle specs that could provide additional power to predictive
models. An example of using these vehicle specs in an AI application could look like:
Chart Your Course
The term Insurtech—a mashup of
insurance and technology—is very much
built on the belief that there are a
plethora of areas within the insurance
industry that would benefit from an
Start
infusion of technology, including AI, to
both disrupt the status quo and propel Integrate Gather
insurance into the future. new knowledge into full set of specs
underwriting process to more for vehicles as
When adopting a new technology, use accurately account for risk they are insured
cases help define an end goal to focus
efforts. By setting a clear destination,
an organization can forge a better path.
This helps clarify the resources needed,
including data, as well as the timeline.

Within the insurance industry, there

are several existing use cases for
AI-driven innovation. These include
chatbots, behavioral-based policy
pricing, claims settlement, and even
Leverage Receive
customer acquisition2. claims for
AI based on the full dataset to
identify previously unknown insured vehicles
vehicle-based risk factors
[2] Science, applied: 3 ways AI and ML
are advancing the insurance industry.
Retrieved November 15, 2021.

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Packing the Right Data
for Your AI Journey
The journey to AI depends heavily on having the right data and the right data
partners. For commercial vehicles, the complexity of trucks, truck bodies, and values Want to learn more about
has led many companies to undervalue vehicles and write risky policies. With proper Price Digests? Watch our 1 minute
data – both breadth and depth – Price Digests believes that Commercial Vehicle video and learn how to reduce the risk
Insurance can become less risky and more profitable. Exploring how the data fits into of underinsuring commercial trucks with
your Insurtech or AI solution is one of the first steps to take towards that goal. Price Digests’ exclusive Truck Body IQ™
Intelligence Solution for Insurance Carriers.

With millions of assets, configurations, and datapoints for vehicles, vessels

and grounds maintenance equipment, Price Digests maintains the most
comprehensive vehicle database in the industry. We deliver data + intelligence,
paving roads to faster and better decisions with perfect-fit data delivery.
PriceDigests.com
Price Digests data + intelligence solutions provide ways to make accurate
data-driven underwriting, lending, and valuation decisions, improving (866) 934 - 2684
profitability and credibility in notoriously difficult sectors.

Price Digests • Data and Insurtech • pricedigests.com • 17