Risk scoring in car insurance
With 1 billion motor vehicles on earth it is not surprising that insuring drivers against the possible risks on (and off) the road is a large industry. In spite of large revenues generated by the insurance companies, the insurance market is very competitive and the profit margins are relatively small. It has been recognized that one of the critical points in the motor insurance ecosystem is the poor ability of the insurers to accurately assess the risk of individual drivers. Consequently many of the high-risk drivers pay premium which is below their expected cost and, thus, must be subsidized by the low-risk drivers. New data sources carry a promise of more accurate assessment of the risk in the car insurance and I will talk about our efforts towards understanding on how much value can be expected from such new data sources.