—– Original Message —–

From: Salvador Minguijon

To: Salvador Minguijon

Sent: Saturday, January 27, 2007 12:48 PM

Subject: “Pay as you drive” Information

Dear ladies and gentlemen: 

            In November we were surprised by the civic and resigned acceptance of the project “Road Charge”. Now, it is very possible that a letter to the English government rejecting the project is subscribed by a million citizens. 

            The government is reaffirmed in developing this project but, without any doubt, will make it with many more cautions. 

            The users have the suspicion that behind this project it hides an increment of taxes, without taking the opportune measures that facilitate the use of the public transport, and they are also very reticent with the implications about the lost of intimacy that this project can suppose. 

            With regard to this last point, I suppose that the article The respect to the privacy in the projects “Pay As You Drive.” can be interesting. 

            Every day we see clearer and clearer the reasons because IBM has bet for the initial development of its project in countries in phase of industrial development. The traffic problems that are generating in China, United Arab Emirates, Malaysia, etc is incomparably more serious than those that has England, even in spite of being the country of Europe with more problems of traffic density, and they don’t exist (or at least they are not manifested) these reticences on the part of the users. 

            IBM has made a shy announcement of the beginning of its tests, but mainly the importance that has its collaboration with the CERT highlighting and on the other hand the CERT announces the same fact with a clear declaration of intentions of what they seek to reach. Definitively it is necessary to keep in mind, IBM has a firm interest in this market. 

            The Victoria Transport Policy Institute has published two new articles with the quality level that has accustomed us, its reading is almost indispensable Win-Win Emission Reduction Strategies and Win-Win Transportation Solutions. 

            While we are waiting some notification of Norwich of how their project is developing, something that I suppose will make to satisfy its shareholders, we continue obtaining information with dropper on the part of its suppliers, in this case of Trafficmaster although the truth is that neither it is very explicit. 

            This month I have also attached some documents that will be useful to follow the state of the patents presented on this project in
Europe. Neither the interpretation exposed in Wikipedia in Telematics neither in Insurance it is completely correct, although the truth is that it is maybe a very specific topic and its detailed analysis would be outside of what Wikipedia seeks to be. 

            In my blog you will find a study on the Penetration mechanisms in the market of the projects “Pay As You Drive” that I hope that it is of your interest. 

            I have upgraded my database Pay as you drive directory. 

            If somebody wants that their address is erased of my distribution list, please return me this message with the word “DELETE.” 

Yours sincerely. 

 

                                                                      
Salvador Minguijon Perez.

The respect to the privacy in the projects “Pay As You Drive”

By the middle of the last year I maintained an exchange of opinions about how to guarantee that the information obtained with the project PAYD cannot be use for activities that can be prejudicial for the right of the privacy of the users. I am not allowed to publish our partner’s opinions. But I believe that my answer can be useful. It was with respect to the comment that I had published:

 “There has not been any project that has opted to process part of the information in the vehicle and to transmit only summary information. It is curious because this was the solution thought in the original project” 

 From: “Salvador Minguijon” <s.minguijon@teleline.es>To: “XXXXX” <XX>Sent: Sunday, July 30, 2006 12:25 PMSubject: Re: “Pay as you drive” Information  Thank you XXX: Do you allow me to publish your mail in my Blog?. Of course, hiding the mail address.  The insurance and technology companies consider that the information on the project “Pay as you drive” is strategic. Since then, they read and they follow the information but they don’t participate in discussion forums, unless they are promotional acts. Certainly never to talk about the problems that is what I try to foment, because I’m convinced that this helps to find solutions. Indeed your proposal seems reasonable, logic and simple.

 There are two special cases in where it is convenient to have detailed information: 

1º In case of an incident or accident, working as black box.  It is convenient for the insurance company to avoid frauds. It is an information which only has value until the user’s information is received and it is contrasted that both coincide. In that moment it could be eliminated. If in the incident personal damages have taken place. It is an important information to clarify responsibilities, but their storage would have to pass to police files or similar. Certainly they could not be in hand of the insurance companies. It is a very important information for traffic security investigation purposes. In this case it is only significant the information of the facts, the infomation about persons can be deleted.

2º During random periods of time, we must obtain detail information of the vehicle, because the following reasons:  The insurance companies can contrast this information with the one received from the client and to detect manipulation on the equipment. It is a temporary value information that, except for detection of a fraud, it can be erased immediately. The analysis of this information tell us of the conditions in those that we usually drive and with the one obtained in the accidents, should inform us about the exact risks that presents the specific behaviors. It’s not necessary a link with the user. One of the things that has surprised me a lot in this project is the ignorance that we have about the incidence of such simple things as the excess of speed or last of the trip on the risk. We know that it is present frequenly in the accidents, about we have many data, but we have very little information on the conditions in those that people usually drive.

 Regards                                                                                                           Salvador Minguijon 

Penetration mechanisms in the market of the projects “Pay as you drive”

In the numerous presentations that I have carried out on the system “Pay as you drive” I have been able to observe that my speaker, immediately, identified it as a product dedicated to the segment of the drivers who use very little his vehicle. 

Only people related with the sector of the automobile insurance were able to identify that, in fact, we were speaking about a very important segment of the market in its size and overalls in its profitability. As 10% of the vehicles make less than 5000 annual Km, they have a very low accident probability and they are those that contribute in a great way the biggest benefits to the insurance companies. 

It would be necessary to return to the first presentation of the report Distance-Based Vehicle Insurance Feasibility, Benefits and Costs: Comprehensive Technical Report (Todd Litman, VTPI) in the year 2001 so as to verify a proportional scientifically correlation among the distance traveled by the drivers and the probability of suffering an accident. 

The second deduction usually made is that if you pay the insurance in function of the use, the drivers would reduce the use of the vehicle. It is a topic on which they have being developing studies as the problems of congestion of the traffic increased, although the publication of 1998 Technical Methods for Analyzing Pricing Measures to Reduce Transportation Emissions continues being an important one. 

With the data of this study we can estimate that the users to whose is imputed the cost of the insurance in function of the use of the vehicle would reduce their kilometrage, and consequently their risk, approximately 10%. 

On the other hand a study of the VTPI also verifies that approximately 50% of the accidents have their origin in errors of the own driver. In
Spain the recent studies show taht the 34% of the accidents are because of a lapse of concentration, which is due most to the fatige and the 24% because of inadequate speed.40 % of the deaths didn´t have the seatbell fastened. 

The capacity of our system “Pay as you Drive” to identify this type of circumstances allows us to consent to another market segment; that of those drivers able to accommodate their speed to the state of the road, climatology, congestion of the traffic, etc, and avoiding to circulate in adverse circumstances that can imply to increase their risk. 

And it not only allows us to segregate this market of low risk but also gives us an influence actively tool about the habits and attitudes in the conduction, informing the user about the risk of their behaviors so that it can be aware of the same one and to reduce it. 

There is another consequence of the study of the TPI, approximately 25% of the accidents are as consequence of errors in the other drivers. The congestion situations, or certain schedules are specially dangerous. 

The first conclusions of the pilot tests of Norwich Union, information obtained on the registrations of 30 million days, is that the probability of a young driver of having an accident is 14 times higher at night in the weekend than in an ordinary day. We can also segment the market which does not use the vehicle under these conditions and segregate it of the general market. 

But, again we can glimpse the possibility to influence in the conduction habits so that it avoids the circulation under specially dangerous conditions as much as possible. 

In fact all this takes us to the obvious conclusion that this insurance system allows a radical improvement in the segmentation of the market identifying those users that present, for different reasons a profile of lower risk than what the global data statistics assign them. We are speaking about the best clients in the insurance companies, those that in fact are paying the costs from the accidents of a group of drivers of high risk, for the single fact of sharing with them spoils of age, sex, antiquity of the identification card of driving or the area in which they live. 

But what was not so obvious, is that besides improving the segmentation of the insurance radically, this policy can motivate the clients to take certain cautions that can make reduce its risk until 30%. 

For those people not familiarized with the sector of the insurance of the automobile, they should keep in mind that in the developed countries the cost of the circulation accidents are between the 1 and 2% of the gross national product and that 20% of the clients originates 80% of the costs. 

But the market is limited. This means that these clients that we segregate of the market, because we identify that they have a low risk, are the same ones that allow the insurance company to obtain benefits. In fact they are their more profitable clients. What would happen if an insurance company loses 10% of its most profitable clients? The consequence is that if they want to maintain its benefit, they would have to elevate the policy of the rest of its clients approximately 7%. 

But this increase in the rates makes that the potential market of the insurance “Pay as you Drive” is notably increased because it opens new possibilities to identify the most profitable clients in the insurance companies again. In fact the more expensive is the rate of the insurance, bigger the potential market of the system “Pay as you drive.” 

The system “Pay as you drive” is an element so radical of segmentation of the market that its success would imply a serious distortion in the market causing an unstoppable increment in the cost of the conventional policies, so the point that at the end of the transition process would end up to disappear or to only survive in marginal markets.