The spread of UBI is inevitable, Octo’s Martin Williams tells Paul Myles. [Ins.Myles.2016.09.02]
UBI will spread through the ranks of the mass market automotive insurance industry – that’s the confident stance being taken by Martin Williams managing director at Octo Telematics UK.
He says its adoption by a wider audience is inevitable as providers reduce costs and make the offering more attractive to the lower risk consumer.
Speaking to TU-Automotive at the famous Silverstone race circuit before the British MotoGP where Octo is a major sponsor, Williams said lowering costs to insurers will be a major playing in expanding the reach of UBI.
He said: “Now that the young driver high-risk market in the UK has been exploited, the opportunity now is to go into the fields of lower premiums where telematics wasn’t previously affordable technology.
“We have tried to drive this market forward by reducing the costs of the devices and their installation and we have devices out in the market right now costing less than £20. We also have many clients who go for self-install which reduces the total fee by around £40 and that allows them to price accordingly more for the mass market sector. We are seeing more insurers going for this self-install whether it be a battery-top device, a 12v cigarette inlet, a windscreen device or an OBD.”
While he admits UBI will not suit all consumers, there remains a great potential for achieving real growth within the next four years.
Williams said: “If you look at the penetration rates in the UK, it’s running at about 3% and by 2020 we are looking at it being at just under 11%. If, and our competitors, can grow that it’s good news for all and I think mass market is the way UBI will eventually go. Naturally, you can’t expect 100% penetration but I think with the introduction of more cost effective devices and the use of apps such as the Octo U it’s achievable to get a much higher rate of penetration than we have now.”
Launched at the 2015 British MotoGP, the app has now secured the endorsement of four major UK insurers who have joined iGO4’s panel of insurers including AXA Insurance and LV=Broker. The app allows drivers to experience the benefits of telematics without being tied to one company and enables insurers to provide up to 10% discounted insurance quotations to customers with a qualifying driver score.
And Williams is happy with the product’s performance so far, saying: “We soft launched this last year and it’s now fully operational with the list of insurers we have signed up to it. What this now gives us is the access to some big players who are all supportive of this technology.”
He said his company has a clear path to return on investment in the app both in the short and medium term.
Williams explained: “We have to monetise this through the CPAs [cost-per-acquisition] that we get from the insurers will drive the front-end marketing so we will use a lot of PPC [pay-per-click advertising], web advertising, natural search and paid-for search etc.
“The more we sell on the back-end the more we’ll be able to put in the front-end so we are growing at a rate of 5,000 a month as it stands and once we start monetisation we’ll be able to put more in the front-end and grow it further from there.
“It has taken us about 11 months to get it fully running because we needed, not single policy wording from the insurers but we needed them to be aligned as to what discounts they would be giving to various ages groups, various scores, etc. So once the CPAs start coming in we’ll be able to spend more on the front-end.”
Some players in the UBI market believe that there will be a tipping point where consumers will actively seek this technology to ensure they are seen to be in the ‘good-driver’ bracket and not paying the extra premiums of the ‘bad-driver’ set. Yet Williams is not so sure, saying: “I’m not sure there will be a tipping point because there are various aspects of telematics that are beneficial to the consumer and to the insurer and to the TSPs [telematics service providers]. If you put the TSP and the insurer to one side because they will drive lower loss ratios, etc., from the consumer perspective this will constantly evolve because the front-end saving on pure pricing is coupled with the back-end saving involved in lowing the cost of claims, especially personal injury, so from a safety aspect, telematics is much more than just about pricing.
“We have many clients who have been rescued by fire, ambulance and police services because of the telematics device.
“So, I’m not too sure there will be a total tipping point or a total saturation point but the world is still the oyster and it’s just ensuring the consumers realise what telematics enables them to do as a driver. So while price is a driver, with the advent of the aggregators driving the prices down, we are taking that to the second level by introducing cheaper insurance and one that benefits all, consumers, insurers and TSPs.”