When second-hand car pricing meets insurer telematics data…

A new data-driven innovation from Discovery Insure is set to reshape how drivers unlock value beyond their insurance premiums. Instead of simply offering lower premiums for good driving behaviour, Discovery’s latest initiative, Vitality Car Rating, promises to boost the resale value of vehicles based on telematics data. It could be just the ticket for brand loyalists who actively engage with the diversified financial services provider’s offering.

Doing ‘special things’ with telematics data

“We believe this will create a new category in the short-term insurance market,” said Discovery Insure CEO, Robert Atwell, at the launch of the insurer’s latest value-add. “We are doing something special with the data we have by offering significant, tangible value to our clients in a way that will be hard [for our competitors] to replicate.” Your writer was among a handful of journalists who attended the launch of the offering at the Volkswagen Advanced Driving facility at Zwartkops Raceway, Pretoria. 

“Over the past three decades, we have collected more than 20 billion kilometres of driving data,” the CEO said. The insurer has leveraged this data to improve driver behaviour across its insured base. In practice, the insurer assessed key data points collected via a telematics device installed in each insured’s vehicle including acceleration, braking, and cornering forces; speed; and smartphone usage. This data was then translated into an engagement level or rating which determined an insured’s reward level. 

And it worked. According to the insurer, Vitality Drive policyholders who achieve and maintain diamond status are less likely to be involved in an accident, resulting in a 68% lower loss ratio than the rest of its insureds. And although rewards programmes are not everyone’s cup of tea, it helps for advisers and brokers to have a working understanding of the benefits that various financial services brands offer. 

Safe drivers cost insurers less

“If you are a safer driver, you have a lower accident frequency and severity, and ultimately that turns into savings for our insureds,” Atwell said. The challenge was to find other ways to convert its market-leading driver behaviour data into tangible rewards. It turns out that the factors being used to determine good or bad driving behaviours are also a great proxy for how a vehicle is being driven (treated) and maintained. Enter Vitality Car Rating, which uses the data generated by telematics devices to set the standard for determining a fair condition-based valuation for a vehicle based on its usage. 

Creating an algorithm to ‘rate’ a vehicle’s condition based on its usage is one thing; but the real innovation came from figuring out how this computation might help policyholders, your clients. Discovery Insure figured it out, in partnership with some popular motor dealers. “Our insureds can use the car rating solution to secure a boost of between 2% and 15% on the resale value of their vehicle, based on how that vehicle has been driven,” Atwell said. At up to R15 000 per R100000 of a used vehicle’s value, this represents a significant benefit just for having driven your vehicle responsibly. 

The logic is simple enough. Good driving practices reduce the wear and tear on a vehicle over its life; but the algorithm also assigns weightings to how a vehicle is driven when cold (the first five minutes of each trip) and any accident/ repair events. The product activation is simple too. Participating clients will be able to request a Vitality Car Rating certificate at any time, and present this to one of the insurer’s approved second-hand car dealer partners, presently Motus Select and Weelee, at point of sale. 

Exceptional relationships underpinned by shared values

Suraiya Naidoo, Motus Executive of Retail Digital Operations, Marketing and Fleet, said that exceptional business relationships were underpinned by shared values. “Discovery Insure and Motus have found a good common ground over a number of years; we share the passion for exceptional customer experience and value,” she said. She noted that the extent of data available through the Vitality Drive programme offered a clear indication of how a vehicle had been driven and maintained during its life. And Motus is backing this data by giving preferred prices to customers with a car rating certificate. 

The benefit is based on the data-backed assurance that the second-hand vehicle being offered to the dealer is indeed in good condition. “We offer a digital journey that allows the customer to drive the sale; customers can use our systems to check what their vehicle is worth at any time, and when they are ready to engage with us around a sale, they can redeem the car certificate benefit by taking a better price,” Naidoo said. The dealer combines its digital, online experience with a trusted human component to guide customers through the eventual selling (and hopefully new buying) process. 

An excellent forecaster of mechanical breakdown

According to Atwell, the telematics factors applied to measuring driver behaviour are an excellent forecaster of future mechanical breakdown. “In our experience, clients that drive aggressively have a 28% higher risk of a future mechanical breakdown of their vehicle,” he said. And South Africa’s second-hand car industry was ripe for a solution that could convert this observation into a tangible benefit. 

Some useful stats shared during the launch are that there are 3.6 times more second-hand vehicle registrations occurring in South Africa annually compared to new ones, and that Discovery Insure processes around 3500 vehicle ‘swaps’ on its books each month, as policyholders replace cars. There are risks, which your writer conjured up in the days after the launch. 

Top among these is that a reputable financial services brand gets mixed up in the ructions that often occur between purchaser and dealer. Need proof, just dive into ‘Nine months, and 46 unhappy xxx customer complaints heard’ published on Moneyweb.co.za recently. The warning here: even if the algorithm is great, there are no guarantees a second-hand vehicle is not going to hit a snag. 

The second dealer partner at the launch, Weelee, boasts experience of both the digital and human car sales process. The business launched in 2016 as an online platform that could put consumers in touch with multiple dealers with a few mouse-clicks; today they also boast a 1000-car mega store in Centurion. Weelee CEO, Anton de Souza, said their partnership with Discovery Insure highlighted the trust element of a second-hand vehicle transaction. “In today’s market, the purchaser of a second-hand vehicle is [hungry for] information that builds on the trust in buying the vehicle,” he said. “That is what the Vitality Car Rating brings to the table. 

Longitudinal data: new insights into car usage

He commented that longitudinal data gathered over the life of the vehicle gave new insights into how a vehicle was used, going far beyond the single data point that most dealers presently rely on. “We have to make sure we buy the correct vehicles; this certificate offers a lot more reliability and trust that a vehicle has been driven the way the seller says it has been driven,” De Souza said. 

Going forward, Weelee’s customers can inform their second-hand vehicle purchase using a combination metrics including their own inspection of the vehicle; Dekra reports; a summary of RMTC data; and the confidence given by a usage-based rating certificate. The car dealership concluded that the innovation would be game changing, not just for Weelee, but for the second-hand car industry overall. Buyers of second-hand vehicles can rely on objective data rather than the seller’s say-so. 

“During Vitality Car Rating’s development, we realised the second-hand vehicle market presents an untapped opportunity for our motor insurance clients to enjoy tangible value by getting more money when they sell their vehicles,” Atwell concluded. He said the certificate would give buyers, sellers and intermediaries in the second-hand car market greater insight into a vehicle’s likely condition even before putting the key in the ignition. The bottom line: policyholders’ positive behaviours, whether through good driving or looking after their vehicles, can be converted into tangible rewards. 

Writer’s thoughts:
Brokers are used to talking about how driving behaviour affects premiums, but a new innovation promises a more tangible cash benefit. Will your short-term motor clients be happier to install a telematics device if it means a better price when they sell? Please comment below, interact with us on X at @fanews_online or email us your thoughts editor@fanews.co.za.