If Internet-connected cars, the blockchain, and machine learning are each going to change the world in its own unique way, what happens when all three are combined? One startup company, based in Kitchener, Ont., Canada, is exploring this question in the unlikely arena of insurance.
According to Plex.ai cofounder Terek Judi, the advent of always-connected cars represents a seismic shift. “We’re trying to reengineer certain aspects of the insurance business around reliably connected cars,” Judi says.
The connectivity, he says, will force car companies toward using open platforms in their vehicles, just as Android and iOS killed off closed platforms when smartphones came to mobile telephony. In such an ecosystem, car software developers could then use open standards like the blockchain—the distributed and secure data ledger on which Bitcoin is based—for communication between cars and with trusted third parties.
“What blockchain technology has introduced is the ability to have a shared database that is open to everybody to contribute to, yet you can still count on security,” he says. “People can’t go and change things in ways that are malicious.”
Secure and reliable but still open communication between cars, Judi says, will then enable a car’s insurer to provide continuously updated car insurance rates that are based on the car’s reported actual use. Plex, Judi says, will be using machine-learning algorithms to process the incoming streams of data from its customers’ cars to optimize each customer’s bottom-line price on the fly.
The attraction for consumers would typically be lower rates, he says, because they’re based on real-world car usage data, not just the generic actuarial profiles of drivers used today.
“Today I write you a policy for one year, and you only talk to me if you had an accident. And if you had an accident, that’d increase your rates,” Judi says. “But if I’m able to look at the functioning of the vehicle, I might be able to introduce variable ways of assessing the risk you pose.”
So, drivers who speed and drive recklessly or face treacherous conditions or weather might find their rates go up after a bad day on the road. But such real-time responsiveness of their rate plans could also induce them to reduce their risky behavior in order to lower future insurance payments.
“I see the insurance industry becoming more of a technology business,” Judi says. But big insurance companies today are typically far removed from the technological vanguard. So, he says, “This inefficiency that exists will provide an opportunity for small companies like ours to slide through the cracks, establishing a presence in an otherwise heavily fortified industry.”
Plex launched in 2016 with a far simpler vision: connecting drivers in the province of Ontario to the best traditional insurance plan for them. Plex, subsisting on revenues from this business as well as development grants, is currently a team of three engineers working on its more ambitious vision. It is now exploring applying to be an insurance carrier in Ontario.
Collin Thompson, Hong Kong–based cofounder of the blockchain venture-capital fund Intrepid Ventures, says he thinks Plex.ai has a lot of promise. Comparing the company’s development to Facebook’s incubation on college campuses, Thompson says Plex is smart to tackle larger industry-size problems first in the context of the Ontario insurance market.
Intrepid hasn’t invested in Plex, Thompson says. But he is keeping a close eye on the company. “Our interest is in the global expansion of Plex and what they’re doing,” he says. “[Judi] doesn’t necessarily have to figure out North America in the first two years. I think if he figures out Toronto and the Canadian insurers, platforms, and aggregators, that’s significant business.”
This article appears in the July 2017 print issue as “Profile: Plex.ai.”