How Norwich Union computes pay-as-you-drive

As far back as 2003 word got out that insurer Norwich Union (NU) was working on a pay-as-you-drive (PAYD) in-car 'black box' device.

Early suppliers emerged including IBM and Orange, for the telematics software and network coverage respectively, and Intec - a company better known for writing billing software for telcos - also came on board.

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However, with in-car devices and customers now numbering more than 100,000, the kind of serious number crunching that needs to be done is based on software from datawarehousing stalwart Teradata, an independently NYSE- (New York Stock Exchange) listed company since the start of October.

The idea is simple in theory - though fiendishly tough to pull off on a second-by-second basis.

By tracking vehicle journeys, taking into account factors such as route, time of day, braking, age of driver and so on, NU promises to be able to reward the best drivers with lower insurance premiums. It maintains this doesn't equate to losing customers paying the highest premiums. These individuals tend to call on their insurance more often and lead to lower margins - far better to leave them to the competition.

Tony Lovick, pricing actuary at NU, said a trial, using GPS-based IVUs (in-vehicle units) provided by Trafficmaster, began in November 2003 and finished 11 months later. It involved 5,000 devices, eight million journeys and 15 billion journey points. The journey points were represented as dots on a map when a vehicle checks in with NU's central computers - in this case a mainframe - every few seconds.

The pilot database had to deal with the creation of 20 million rows every day.

Lovick said: "At 100 times that scale, we couldn't imagine it working."

At that point, one of NU's IT team tasked with taking this on to the next step asked several key questions, Lovick said, including - what's the world's biggest database? What do Wal-Mart use?

"All paths led to Teradata," he said.

The relationship began in October 2004 and from the beginning was driven by Teradata proving it could hit various markers, rather than NU trusting industry benchmarks.

Lovick said: "What we wanted was a solution to a business problem, obviously with some IT involved to achieve that."

Even on first looks, results were impressive. The Teradata box worked at a fraction of the cost of in-house servers running IBM's AIX flavour of Unix. There didn't have to be rewriting of code in and out of the datawarehouse and it all used efficient data types, for example working mainly with integers.

There was "an outstanding level of throughput", according to Lovick. And, because when NU has between half a million and one million customers signed up there will be about one billion rows of data generated each day, it worked on a compression technique (which it patented) - bringing down volume to two bytes per second of driving, per vehicle.

The datawarehouse - somewhat analogous to billing that goes on in a highly transactional environment such as telecoms (by time unit, by geography etc) - is among the biggest in the world and is attracting attention from all kinds of verticals.

The UK government is fascinated as it eyes plans for a PAYD system to replace standard road tax discs.

NU's Lovick doesn't rule out the project evolving further but says, for now, it is a three-way win. There is greater driver choice, with the potential for lower costs and greater risk awareness. There is greater safety on the roads for all. And society, on balance, benefits from saved lives and less fuel burned.

NU has said it will make its SQL database scheduling code available to others as freeware.