Telemetrics Transforming Car Insurance
- By Lachlan Colquhoun
- September 12, 2022
Car insurance may not sound like a fertile business for digital innovation, but when you pair it with a sensor that plugs into vehicle diagnostics, it can be a game changer.
This is the approach being taken by Australian startup KOBA Insurance, which entered the market in February this year with its core product, a ‘pay as you go’ model for car insurance.
Andrew Wong, KOBA’s founder, says that car insurance is one area of the market yet to be disrupted. The traditional model is to get a bill for one’s year’s insurance based on their assessment of your risk and the broader insurance pool.
“There’s really no ability for drivers to determine how much they pay because the insurance company does all the maths. [The insurance company] charges you what it thinks it need to charge in order for them to reach profitability [and] cover all of the [client] risks,” says Wong.
The KOBA model, he says, is to put control back into the hands of the drivers. Customers pay a one-off fee to insure their vehicles while stationary — in case they are sideswiped by other vehicles or stolen — and from there, it comes down to a per kilometer charge per month.
Drivers who drive substantially less than the average of 12,000 kilometers per year which is the average in Australia, can expect to pay substantially less through this model, according to Wong.
Connected car services
What transforms the business from just being another way of pricing insurance is the installation of the sensor, which not only records times and distances of the trip to calculate insurance but, which Wong says, enables KOBA to also move into the connected car services market.
“There’s actually a new and interesting world which sits behind the insurance, [such that] there is now a data connection between your car and an app on your phone,” he says.
“The connected car can actually deliver some real value. Connectivity tells you where your car is all the time, in case it is stolen. Then there are information services like notifications when you need service, when you need to buy tires or when you need to maintain a log book for tax purposes.”
“All of a sudden, we are enabling a car care solution on your phone, and as an insurer, we are able to offer customers all this other value beyond just selling insurance.”
“You look at the world of mobility, and insurance products are just not keeping pace”
Another new business initiative for KOBA was to provide insurance for car sharing platform Car Next Door, where owners put their vehicles out for rent when they are not using them.
Many vehicle owners see their cars more as a business than personal transport and rarely drive them. The KOBA solution accurately delineates who has responsibility for a vehicle when it is being hired and transfers any liability back to the customer.
Insurance not keeping pace
In the sharing economy, explains Wong, there is still a “grey area” around insurance when the vehicle is being driven by a customer. With the KOBA solution, Car Next Door clients purchase insurance in the price of the vehicle hire, and the on board sensor is able to precisely determine the moment this insurance is activated and stopped.
“You look at the world of mobility, and insurance products are just not keeping pace,” he says.
Wong says that because KOBA is a technology enabled, cloud native business — like Car Next Door — it was also possible for them to develop and launch the new product in a matter of weeks, “not years as in classic insurance.”
KOBA is not the only company pursuing the model of pay as you drive insurance. Wong said he’d love to “claim to be the genius” who thought of it but concedes it is a model which other companies are also offering in different markets.
In Australia, however, KOBA has something of a first mover advantage not just in insurance, but in the idea of offering connected car services as a third party.
It is yet to be seen where this can go in coming years as the market develops and new applications open up, but KOBA is in there already, disrupting traditional insurance and creating new revenue streams simply through connecting sensors to the vehicle and leveraging the world of telemetrics.
Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and the NextGenConnectivity editor. He remains fascinated with how businesses reinvent themselves through digital technology to solve existing issues and change their entire business models. You can reach him at [email protected].
Image credit: iStockphoto/gustavofrazao