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A decade perfecting behaviour-based insurance

02 June 2021 Gareth Stokes
Anton Ossip

Anton Ossip

If all of South African motorists achieved Gold or Diamond status on Vitality Drive, the country’s road accident statistics would be among the best in the world. This was one of the observations in a white paper published by Discovery Insure to celebrate 10-years of reinventing motor vehicle insurance in South Africa. Since its launch in 2011, the insurer has shown incredible success in applying its behavioural-based insurance model to the domestic motor insurance industry. FAnews would like to take this opportunity to congratulate the brand on its Shared-value Insurance model and razor-like focus on improving driver behaviour. Both initiatives continue to deliver positive outcomes for the insurer, its insured and broader society.

The white paper offers a comprehensive overview of the insurer’s decades-long journey to create a nation of great drivers. “Good drivers have lower claims frequencies and lower claims severity and, as a result, are good for us as the insurer; we are able to give money back to our clients while doing good for society,” said Anton Ossip, CEO at Discovery Insure, during an exclusive interview with FAnews, held 31 May 2021. The group’s long-term statistics confirm that drivers who attain Vitality Drive Gold status experience 61% of the claims severity of those on Blue status, while better drivers experience only two thirds of the claim events over comparable time frames. These statistics combine to give a loss ratio of just 51% for drivers on Gold status and 46% on Diamond status, compared to the 100% baseline of drivers who are not engaged. 

Pioneers in telematics and usage-based insurance

Stories about the impact of technology on the non-life insurance sector and the emergence of Fintech and Insurtech start-ups have dominated the media over the past three years. In fact, so much has been written about telematics, the Internet of Things (IoT) and how connected devices are rewriting traditional insurance models, that we have all but forgotten that a local insurer has been pioneering telematics and usage-based insurance (UBI) for over 10 years. “Technology has been at the core of the Shared-value Insurance model that has built value for our customers and our business over the last decade,” said Ossip, who is constantly amazed by present day Insurtech start-ups who talk about telematics as a unique and innovative proposition. 

This is not to say that telematics and its associated technologies have remained static. “Technology never slows down and there are always new things that we can do, especially in the area of using big data to improve pricing,” said Ossip. Vitality Drive uses telematics technology to collect data about insured’s driving behaviour and then applies actuarial algorithms to this data to develop scientific measures of driving behaviour. FAnews readers, many of whom advise their clients on telematics-based motor insurance solutions, will be quite familiar with how the model works. The insurer uses smartphone telematics in conjunction with an Internet of Things (IoT) device that is installed in-car to collect data points that are a proxy for driving behaviour. This data, over time, allows for the segmentation of drivers into statuses based on their measured driving behaviour... 

Being a pioneer in the telematic business has its benefits and Discovery Insure has already gathered more than 14 billion kilometres worth of driving data since it started. Ongoing improvements in data processing and storage mean that insurers with telematics platforms, and a jump start in accumulated data, can stay a step ahead of the crowd insofar innovative solutions. “We recently launched new technology to the fleet industry; we use artificial intelligence (AI) to extract the right information when an accident takes place,” said Ossip. The insurer, with some help from AI, is able to build a complete view of an accident using a combination of telematics data and video feeds from cameras placed inside the vehicle cabin. 

A decade of perfecting the risk / price balance

We asked Ossip whether they would ever leverage telematics data to move from a traditional monthly insurance premium to a solution that allows customers to place assets on cover for shorter periods of time, in pay-per-use solutions. “We are always looking at the best ways of matching price to risk; but there are different schools of thought as to whether people want to have variability about their premium or greater certainty in terms of what they will pay from month-to-month,” he said. He also observed that turning risk on or off, by specifying periods of asset use, did not necessarily change the overall risk presented to the insurer. 

Pay-per-use insurance has other drawbacks too. It introduces a new risk to clients who are not keen to take an active interest in the day-to-day management of their insurance covers. For example, how do you remember to place an item on cover each time you intend using it, and not forget to take it off cover afterwards? From an insurer perspective, the pay-per-use model introduces additional fraud risks that have to be aggressively managed. 

Growing insurance the traditional way

Discovery Insure has grown from strength to strength over the past decade, thanks in part to the dedicated financial advisers and insurance brokers who make up the group’s traditional distribution force. The group has also outgrown its initial role as a ‘nice to have’ for loyal supporters to stand out as a competitive, standalone insurance offering. “In the early days we found that the majority of our clients had other group financial products; nowadays, we often find that Discovery Insure becomes their entry into the group,” said Ossip. But the guiding vision remains on taking driver behaviour solutions to the next level and creating a nation of great drivers. 

Discovery Insure is celebrating its 10-year anniversary with a campaign to encourage more drivers to join the fold. They are running a campaign that offers new clients up to 50% of their motor premium over a six month period, paid back at the end of the period. To qualify, the client must reach Gold driving status during one of the first three months after they join the insurer. But the bigger celebration is around the ongoing positive contribution the brand is making to improve outcomes on South Africa’s roads. 

The Wild West of driver experience…

Unfortunately, while Discovery Insure saw a 32% increase in the number of good drivers on its books in the first six years; the same cannot be said for the Wild West of South Africa’s roads. Our statistics seem little improved from 2011, when the country had the third highest road deaths per annum globally, at 33.2 road deaths per 100 000 citizens. We suffered more than 10 000 fatal crashes and over 13 000 fatalities in the 12-months to 31 March 2011. Today, the number of vehicle accidents and road fatalities remain high, with an estimated total cost to the economy of or R120-R155 billion per annum in accident damage alone! These are staggering statistics that could be turned around by focusing on the obvious low hanging fruit of improved driver behaviour. 

If all South Africans were on Gold or Diamond Vitality Drive status, the country could achieve a reduction of up to 90% in the number and cost of road accidents. “We are sharing the message of how our driver behaviour programme has worked; how many people have joined our programme; how their driving improves when engaged with Vitality Drive; and how good driving outcomes remain in each of our hands,” concluded Ossip. “If all South Africans drove better, we could see a rate of accidents similar to those in developed markets”. 

Writer’s thoughts:
I was among the insurance journalists who interacted with Discovery Insure during their start-up year. My congratulation to the brand for leveraging telematics and IoT technology to stand out as the dominant tech-enabled motor insurer in South Africa today, and for growing from strength to strength over the past decade. As for our loyal readers, I ask: Do you think a driver behaviour telematics solution should be mandatory in South Africa’s high motor vehicle accident context? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected]

Comments

Added by Gareth Stokes, 15 Jun 2021
I think Greg summarises the outcomes perfectly... The telematics model in this case is being used to encourage good driver behaviour. And there are plenty of spin-offs / value-adds from the real-time processing of telematics data, such as accident response.
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Added by Greg, 03 Jun 2021
Discovery great innovators as always.Our family takes great pleasure in competing to achieve the highest weekly drive score by driving safely and trying to constantly improve.
Have also seen the wonderful response through the vehicle impact alert system providing the appropriate rescue and care of one of our friends.
Everything of the best for the next decade.
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Added by Gareth Stokes, 03 Jun 2021
Thanks for the comment Simon. Some level of cynicism is expected. The behaviour change relates more to the incentive programme linked to the device, rather than the device itself.

I share your concerns over repudiation... And although insurers have repeatedly said they would not use telematics data in this way, there appears to be no logical reason why they should choose not to. I mean, if they are prepared to trawl social media pages or scan credit card statements...
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Added by cynical simon, 02 Jun 2021
I still need to hear any compelling evidence to prove that the installation and use of telematics in motor vehicles LEAD TO PRODUCING BETTER DRIVERS AND HOW THIS INITIATIVE enhance the TCF principle.
That it leads to bigger profit because of repudiation of legitimate claims is a given.
It allows Big Uncle access to information that it can not, and should not be trusted with. .
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