Momentum Responsible Driving: An exciting new era in motor insurance

Momentum Short-term Insurance’s new product - Momentum Responsible Driving - provides comprehensive insurance, with premiums based on individual driving behaviour. Tapping into a fast-growing global trend in vehicle insurance, it takes individual underwri

While insurance products based on telematics are not new in the South African market, these have focused mainly on distance travelled, and in some instances, on the area and time of day.

Momentum Responsible Driving has taken this one step further. In addition to the typical distance, area and time of day measurements, the product will also include factors such as speed, acceleration, deceleration and cornering to determine a client’s risk profile., enabling the intermediary to provide more competitive premiums for low risk clients.

Targeting a growing consumer segment

“Consumers are increasingly becoming more focused on being treated as individuals with unique needs. This product allows them to be rated on something they can actually control – their driving behaviour. The success of the initiative rests on the concept of rewarding responsible and safe driving behaviour,” says Pieter Erasmus, Head of Marketing, Sales and Distribution at Momentum Short-term Insurance. “We believe that clients across all age groups can be responsible drivers. For this reason, our profile for this product do not refer to a specific age group, gender or claims experience, but rather focuses on each individual’s responsible driving behaviour.”

Responsible driving behaviour, according to the new product, is measured by the following criteria:

• driving less than 15 000 km per year;
• staying within the speed limit;
• not driving through corners at excessive speeds;
• not braking or accelerating harshly;
• not often travelling at night.

Typical examples include moms that only drive their children to school and back, or perhaps a Vintage car-enthusiast who only drives the vehicle occasionally. family car that stays at a holiday home and is only driven occasionally.

Niche product

“This product caters for a very specific type of client, hence it is currently seen as a niche product,” says Erasmus. “We’re of the opinion that the uptake will initially be low, but will increase as more insurers add this product to their underwriting model and people are sensitised to the monitoring of driving behaviour. Better policing and enforcement of traffic laws could also in time make a product such as this more appealing.”

The pay-off

In the absence of any actual driver behaviour data at inception, clients will initially be underwritten according to Momentum Short-term TInsurance’s normal underwriting process. “It is a very detailed individual underwriting philosophy in any event, which we believe will accurately determine the correct premium until sufficient driver behaviour data is available. Nevertheless, a small premium discount will be applicable to clients selecting this cover option, since clients who are willing to have their driving behaviour monitored are slightly better risks. The discount granted for taking out the product should at least in part cover the cost of the tracking device required in order to qualify for this product,” explains Erasmus.

“We subscribe to the philosophy of collecting data with the view of adjusting a client’s premium in accordance with his or her actual driving behaviour, therefore, we are allowing the client an opportunity to prove his or her risk averseness to us. For that reason, we will not give clients any money back or expect clients to pay in for previous years based on their driving behaviour. Responsible or irresponsible driving behaviour will influence future premiums. Clients who drive responsibly could possibly receive a reduction in their premiums at rerate stage, while drivers on the opposite end of the scale could expect an above average upwards adjustment in their premium. We envisage that the ultimate saving for a responsible driver could be up to 20% of the premium.”

Clients in control

Premiums are guaranteed for 12 months. So if, for example, the client goes on a road-trip holiday and drives 6000 km during that time, he or she won’t face a massive premium increase for the next month due to an out-of-the-ordinary trip. “By not adjusting premiums on a monthly or quarterly basis, we ensure that clients can still budget for their short-term insurance premium with certainty. This, along with complete control over their driving behaviour, means that this product places control in the hands of the consumer in terms of the premium they pay,” adds Erasmus.

The criteria of 15 000 km per year is merely one of a few guidelines that allows Momentum Short-term TInsurance – and its brokers - to understand the client this product will fit. “Six measurable factors are used through the application of this device - a client that drives in excess of the suggested kilometres will be disadvantaged in that one area, but could do well on the other measurable factors. However, should a client not generally stay within all the prescribed guidelines, it could mean that the premium can increase after 12 months. Thus, the risk profile is determined by looking at all the factors combined that provides statistical evidence of what the correct
premium should be,” comments Erasmus.

Ready for Big Brother?

When the concept of telematics was first introduced to the local market, many consumers associated it with a “Big Brother is watching…” scenario, fearing that insurers would use the information against them with the intention of repudiating claims.

“Since we incorporate a number of additional factors, such as acceleration, cornering and braking, some clients could perceive it as ‘big brother watching them’. However, these are not the drivers we are targeting with this product,” comments Erasmus. “We believe that responsible and safe drivers will welcome this new technology as a means to prove that they drive responsibly. The objective is to determine risk and premium more accurately, not about finding another way to repudiate claims. ”

Access to information

As with any other tracking device, Momentum Short-term TInsurance would have to obtain the client’s consent before the information provided by the telematics device can be used for claims purposes. Clients also have full access to the data, as they will receive a report from Momentum Short-term Insurance every month, displaying their behaviour or scores during the previous month, compared to that of the average client who has the same product. In this way, clients can monitor their own behaviour and change it if necessary. Clients will also be able to log on to the Tracker Skytrax (Responsible Driving) website, with a username and password provided, to access their driving behaviour information.

Technical specs

Driving behaviour is monitored by means of a sophisticated Tracker Skytrax device which is fitted to the client’s vehicle, and incorporates GPS and accelerometer technology. It provides data such as:
- Distance travelled
- Area
- Time of day
- Speed
- Acceleration
- Deceleration (braking)
- Cornering

There are three different device options and the device can simultaneously act as a regular tracking device, should the client choose this option. The client signs an independent 36-month contract with Tracker and the monthly premium can vary between R55 and R199 – depending on the services to which the client subscribes.

New opportunities for brokers

This product ushers in a new era in motor insurance, allowing Momentum Short-term Insurance brokers to offer their clients, who are safe and responsible drivers, a unique and highly individualised solution. “It is another example of the innovation and inventiveness through which Momentum Short-term TInsurance ensures that its brokers remain on the cutting edge of industry developments and are able to offer their clients real solutions to their insurance needs,” concludes Erasmus.