A Ride Down the Digital Highway

By April 15, 2014Innovation
Image Credit:  Garry McMichael

Image Credit: Garry McMichael (with permission)

I don’t usually write about the insurance industry, but at the Celent Innovation and Insight Day in New York I saw a presentation so intriguing I felt it deserved a post.

The subject was insurance for drivers under 25 years old, and the presenter was Richard King, founder and CEO of ingenie, a startup that is radically disrupting the UK insurance industry.

Car insurance everywhere is expensive for young drivers, given their propensity for wrecks. King’s idea is to make these motorists safer by providing them with feedback on their driving patterns. In this case, data is collected from an on-board motion sensor, and prudent drivers can save big on their premiums. King claims that his program has achieved an average savings of 39 percent for 17 year-old drivers over the past year.

Beyond the financial incentive, there’s also a social aspect to the program. Drivers receive Twitter-style push notifications via email and text every 10 days, which is the time it takes to collect sufficient data. Green means they are on track for discounts, while Red indicates room for improvement. Black messages, which are delivered same day via text and email, indicate dangerous driving and prompt a phone call from a trained counselor.

King estimates that less than five percent of policy holders ever receive a black message. Of these, 50 percent improve, while the rest move to other insurers, which is fine by King. He estimates that while the overall frequency of claims hasn’t dropped, the number of catastrophic claims has fallen significantly.

Does this sound like Big Brother? Updates are not shared automatically with the parents of juvenile drivers, although they have the opportunity to share should they choose. In any case, King believes that young drivers actually want more feedback on their driving habits. To that end, he calls his insured drivers a “community”, and reinforces this concept through media campaigns and hashtags such as #myfirstcar and #don’tdrivedistracted.

Since I heard King’s presentation, I’ve been wondering what implications his context-rich approach to driver’s insurance might have for the banking industry. Credit scores already offer a reasonably good barometer of a borrower’s likelihood to repay a loan, so I doubt there’s an opening there. Possibly banks could help borrowers lower the risk of overdrafts through alerts based on spending patterns, or engage customers through real-time budgeting tools. Perhaps the answer is special offers as a reward for healthy financial habits, much like the incentives companies offer their employees.

King’s idea—that documented safe driving patterns are a better predictor of risk than a proxy like age and are worthy of discounts—represents the sort of personalized offer that financial institutions typically reserve for their wealthy clients. Surely there’s a way that his concept can be transferred to the banking business?

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