Octo Telematics has acquired the usage based insurance (UBI) department of Willis Towers Watson, in a move to move away from hardware and into analytics offerings. Targeting insurers, Willis Towers Watson’s DriveAbility platform, which aggregates telematics data, will now be integrated into the data platform Octo launched earlier this year called Next Generation Platform (NGP).
The move away from aftermarket hardware comes at a time when most automakers are now selling their vehicles with embedded telematics systems, which is already leading to a decline in demand for aftermarket versions. This does not mean to say that the aftermarket telematics sector will be completely dissipated by the trend, as there will always be those consumers that are looking for a simple solution they can use in combination with their smart phone, as opposed to the relying on the platforms provided in the car.
Riot spoke with Octo Telematics’ head of market intelligence, Andrew Lee, who described how the underlying algorithms in the DriveAbility platform were already very popular with a mixture of large US insurers. The software provides the insurer with a score related to their customer’s driving which can help them determine how they will price a customer’s renewal. Octo’s NGP platform has yet to gain much traction in the US, and the deal might help change that.
Currently, the main competition for Octo’s NGP is coming from the proprietary in-house systems that insurers are developing themselves. Last year, insurance giant AllState launched Arity, a startup aimed at providing insurance analytics platforms. Lee feels that Octo already has an advantage in the market, because it is already working with a mixture of insurers in area such as home, travel, and health, which it hopes will give it a richer insight into serving its customers.
Lee was asked whether embedded telematics units would mean automakers got control of the car’s telematics data, and if that gave them influence in the insurance market. He responded by saying that regulators were unlikely to let OEMs get away with this, and pointed to the rulings by the European Commission to ensure there was a fair marketplace for customer data once those customers had agreed to have their telematics data shared.
Marketplaces for connected car data are already attracting interest and partnerships from multiple enterprises. BMW, earlier this year, launched its CarData platform, which, with the user’s consent, allows third parties to access the data collected by the vehicles onboard computer.
Other automakers are already looking to follow in BMW’s footsteps. Mercedes is reportedly working with Otonomo, a startup that uses a cloud solution to collect and resell car data to third parties – of which there are already 70 partners buying data. Otonomo has raised some $40m in capital since its launch in 2015, most notably $25m coming from Tier 1 automotive supplier Delphi.
In terms of an insurance analytics platform, all the additional data allows the insurer to go a step beyond traditional segmentation to micro-segmentation. Segmentation is a method by which an insurer determines how much they believe a customer should be charged, and it is essentially done by looking at a typical set of data such as the customer’s age, residence, employment and vehicle model. Telematics data allows the insurer to micro-segment its customers to more accurately determine their likelihood of making a claim, so they can price the customer renewal contract more accurately.
Lee believes that moving forward, Octo will be looking to expand its NGP platform to address other insurance areas, as the more relevant data insurers have about a consumer, the more accurately they can price their premiums. The micro-segmentation and subsequent crossover of data between home, health, travel and vehicle insurance makes for an attractive proposition on the insurer’s side. However, many consumers might feel uncomfortable about insurance companies having too close a watch over their lives.
Earlier this year, Octo partnered with Whoosnap, to add the company’s Insoore application to NGP. Insoore is a community platform that allows certified community members to take photos from their smartphones or cameras, which can then be purchased on the platform. Insurers can then purchase photographs at cheaper rates than professional a photographer. – representing significant savings. The same process can be applied to insurers looking to process a claim, as the insurer can request photographic evidence of damage to evaluate the incident – adding to the total feature set of NGP.
Octo says the market for UBI is set to reach 93m policies globally by 2020, as it hopes to be a market leader in providing the analytics platform that manages those policies. Automakers are increasingly bundling the price of connectivity into the total cost of their vehicles and offering telematics for a limited amount of time, and a continuation of this trend should help to further proliferate adoption of usage based insurance. GM plans to offer its OnStar service and telematics for free for the first 5 years of vehicle ownership, which should help attract UBI providers to its platform.