Samuel Knott from By Bits spoke to Insurance Shed to answer their most-asked-for FAQs
What is the aim/purpose of By Bits?
“By Bits provides the means for insurers and insurtechs globally to deliver compelling new propositions and supercharge their capabilities based on the growing consumer demand for fairer and transparent pricing via usage-based insurance (UBI).”
A look at the website says By Bits is the complete usage-based insurance platform that can be developed and deployed in 12 weeks? So, what does that mean?
“Insurers operate small margins so not all have large budgets for new technology. Additionally, continued profits from existing business on legacy systems means they do not want to disturb those customers. But insurers can deliver UBI policies without having to overhaul legacy technology. It’s not a case of rip and replace to try and keep up with digital-native upstarts but simply adding on simple and intelligent tools to an existing tech stack.”
Usage-based pricing is an exciting development in the industry, can you tell me more?
“So much of our lives has been impacted by the pandemic and motoring has not escaped what has turned out to be a massive force for change. Not only has driver behaviour altered, impacting vehicle usage, but technical innovations in many areas of life have led to higher expectations in customer interaction and service from customers. As a consequence, the insurance industry is at a flection point. On the one hand it is faced with an ageing pool of established drivers with operations built to match how this demographic interacts with its services. On the other, new generations of digital native road users are constantly entering the field that have come to expect nothing but the very best levels of service, instant response times and competitive and fair pricing. All of this is set in the backdrop of a socially conscious consumer and a macroeconomic environment that has forever changed how, when and where people can work.
“It means the insurance industry is facing multiple challenges at once. Existing technology and pricing models need to change. Compulsory use of telematics-based on behaviour and use are inevitable and have to be factored into the mid and long term future of the industry. Yet at the same time, businesses must do more with less. The cost of acquisition must become lower. The rise to prominence of UBI allows insurers to react quickly, cost-effectively and implement better engagement solutions to expand their customer base.”
Who are the customers?
“National Insurers, International Insurers, MGAs, Motor Manufacturers, Communication companies - essentially any company that wants to offer out insurance whether through their own capacity, as an embedded offering or via external capacity.”
How do insurance companies traditionally price their products? What factors go into pricing?
“Traditional pricing metrics are based on mass data relating to information on the driver(s), vehicle(s) and location. This includes make/ model, power, seats, date purchased, modifications, where is the vehicle kept day/night, address, driver age, Licence type, experience, convictions, claims, NCD, vocation, use”
What are the GIPP changes?
“The general changes of UBI in simple terms work on two principles - how much a vehicle is driven and how it is driven. Traditional pricing factors still have relevance but UBI allows data to be accurately consumed and used to factor into pricing metrics. In terms of PAYD - the pricing model changes to an annual rate and usage-based rate i.e. a premium to insure the vehicle is always insured and a rate attributed to the use of the vehicle. Behavioural pricing points will include when and how a vehicle is driven. This can include factors such as rapid acceleration, harsh braking, cornering, roll on vehicle, speed. Depending upon the complexity of the telematics device tracking this info it can go as far as to identify the number of passengers in the vehicle and even be used to identify FNOR (First notification of risk).”
How do GIPP changes impact customers?
“UBI focuses on the use of data in real-time. In simple terms for end customers this can and should have impacts upon their insurance premium. With individual driver behaviour being used as a pricing point for the first time individuals have a level of control over how much their insurance premium will be. They won’t be adversely affected by poor driving of others or equally rewarded if they are a poor driver - mass generic data won't hold as much value, individual driver performance will become a key metric. In terms of drivers who don't drive as much a UBI policy based upon miles driven is obviously a lot more attractive and the benefits can be passed to the customer.
“Overall, it also provides customers with more options of how they want to insure their vehicle. A more customer focussed approach will pull the market away from end-users feeling unfairly charged and add in a layer of transparency that has been promised for many years without really being delivered.”
What are the challenges for customers and the challenges for insurance companies?
“The main challenge is a change in mindset/ behaviour and ultimately adoption. It is fair to say everyone wants to feel like their insurance isn't unfairly overcharged. For this to occur the logical option is UBI. The challenge with that is customers will need to accept their driving behaviour is being monitored and they will need to open up their agreement that this data can be tracked.
“The challenge for end insurers is uptake from their client base. I think we are in a chicken and egg scenario. We need insurers to trust the consumer market will take this up and equally, we need the consumer market to take this up to drive true change within the industry on the insurer side. Ultimately the responsibility sits with insurers to provide product options and drive the benefits of UBI. The insurers that put more control with end customers from premium, control of policy and engagement the more prosperous they will be in the coming years.”