Is it all about you or your driving? Designing IoT‐enabled risk assessments

Yi‐Jen (Ian) Ho; Jingchuan Pu; Dian Zhang

doi:10.1111/poms.13816

journal article Nov 01, 2022

Is it all about you or your driving? Designing IoT‐enabled risk assessments

Yi‐Jen (Ian) Ho

Jingchuan Pu

Dian Zhang

Production and Operations Management Vol. 31 No. 11 pp. 4205-4222 · SAGE Publications

View at Publisher Save 10.1111/poms.13816

Abstract

Technological applications disrupt the way to assess risks in the auto‐insurance business. Contrasted with the common practice based on static demographics, usage‐based insurance predicts risks using driving data collected from Internet‐of‐things–enabled telematics. This study proposes a novel solution leveraging the synergy between big data and hierarchical modeling. We specifically consider two aspects of mobility, namely,
trait
and
trajectory
, monitored by global positioning system (GPS), on‐board diagnostics, and in‐vehicle cameras in real time.
Traits
here refer to drivers’ distinctive driving behaviors (styles), whereas
trajectories
consist of the vehicle motion sequences and the contextual factors on trips. We operationalize semantic features of the two to assess risks at both trip and driver levels. Using fine‐granular driving data and crash reports, we find that behavioral traits play a significant role in predicting crashes, given individual heterogeneity and temporal dynamics. In a series of empirical validations, the proposed solution outperforms the current practice and alternative predictive models considered by prior literature. We show that the mobility‐based models are superior to the demographic‐based ones. Moreover, our model achieves the comparable performance of neural networks, improving the recall of class‐weighted logistic regression, nested support vector machine, and cost‐sensitive random forests by 44.23%, 29.18%, and 24.59%, respectively. Last, our approach is robust, data independent, and computationally efficient for skewed and small samples. This study provides several managerial implications and a blueprint for the auto‐insurance industry to operationalize IoT‐enabled risk assessments in the era of 5G communication.

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Details

Published: Nov 01, 2022
Vol/Issue: 31(11)
Pages: 4205-4222
License: View

Authors

Y

Yi‐Jen (Ian) Ho

Smeal College of Business, Pennsylvania State University, University Park, Pennsylvania, USA

J

Jingchuan Pu

Warrington College of Business, University of Florida, Gainesville, Florida, USA

D

Dian Zhang

College of Computer Science and Software Engineering, Shenzhen University, Guangdong, China

Cite This Article

Yi‐Jen (Ian) Ho, Jingchuan Pu, Dian Zhang (2022). Is it all about you or your driving? Designing IoT‐enabled risk assessments. Production and Operations Management, 31(11), 4205-4222. https://doi.org/10.1111/poms.13816

Is it all about you or your driving? Designing IoT‐enabled risk assessments

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