Auto Insurers keep looking for their lost keys underneath the streetlight.

Root is a new auto insurance product that uses an app to track prospective customers' driving behavior: where they go, what they do, whether they use their phone, hard break or accelerate. The premium is based - in part - on the experience gathered by the app. This is appealing because if I think I'm a better than average driver, I am likely to download the app - it's so easy. It's a great customer segmentation strategy that should attract better drivers. But it's not a panacea. Why? Because we look for lost keys under the streetlight.

Let me explain: In insurance, it is rarely the risk we can see that is dangerous. It's the hidden risks - the ones that we don't see - that wreck profitability. For example, the app won't tell carriers that one of their drivers that seems to be driving safely is in fact a known fraudster connected to a host of other henchmen who also are also making sure to be super safe drivers. Or that the customer who is signing up for collision insurance has a lot of preexisting damage that he intends to file a claim for.  Or that a covered vehicle is commercial use which bears much higher liability limits than the customer is paying for. 

Root has developed a great system to get much more precise risk data on things that customers want Root to see. It's like they have a very bright streetlight - and so long as the keys (risks) are in the cone of light, Root has an edge. But (as with most lost keys) the worst risks are beyond the light's reach. And having such an outstanding tool that generates such insight on the risk we see could lead us to over-focus on what we now have lots of data on rather than to search for the unknown risk.

It is these risks: the  hidden ones that customers don't want you to see - that we focus on. VeracityID's mission is to enable carriers to identify and correct inaccurate and/or fraudulent data up front during the quote process and during the life of the policy. We look where where the light doesn't shine.