First posting to the Smart421 blog.  Maybe I should just do a “hello world” effort?
Ach well, in for a penny…

Someone sent me a link to the Coverbox website a few weeks ago, as they knew I’d been involved, with Smart421, in Norwich Union’s Pay As You Drive (PAYD) programme in 2005/2006.  Last week, someone else sent me a link to this article on the future of Telematics within retail insurance which says:

“The company that clears the remaining hurdles first will undoubtedly steal a competitive march and grasp the opportunity to decommoditise a segment of the market”

Before I go any further, let me make it clear that I haven’t yet investigated the detail of how the Coverbox proposition works, either on a technical or contractual basis, although I’d be delighted if someone else has done and can set me straight.  So, with that in mind, these are just some thoughts triggered by the above websites…

By “hurdles” and “decommoditise” the author might mean things like:

  • whoever figures out how to provide PAYD-type insurance cost-effectively
  • whoever creates a genuinely valuable proposition for potential customers (ie not just insurance, but other stuff on top)
  • it needs to become more than just a question of which insurer offers the cheapest insurance whether standard or PAYD

I’m inclined to disagree, at least to some extent, in regards to de-commoditisation.  If PAYD insurance is really ”the future” (and I can see arguments on both sides – but that’s another discussion), then I think part of the answer is to make the technology boxes and backbone (i.e. the expensive bits!) totally commoditised.  This is in line with trendy SaaS and Cloud principles, and it seems to me to be the only way to truly benefit from economies of scale in this area.

Enter Coverbox who, from November 2008, basically provide a PAYD “COTS” service that insurers can re-sell.  It’s then down to each insurer to create the value-added bit that will attract customers to use Coverbox through them, rather than a rival insurer.  This significantly lowers the barrier to entry, making it much easier for an insurer to join the PAYD game.

One of the next  “hurdles” might be whether and how the insurers can exploit the data generated by their customers - e.g. data sales, heavy-duty analysis to inform actuarial and pricing decisions, etc.  Assuming insurers can access the data on their insured parties (and only their insured parties) as held by Coverbox, they’re not much worse off than if they were running the database themselves.

However, I’d guess Coverbox will be retaining ultimate ownership of (anonymised) data and the right to sell this to third parties.  I’d also guess Coverbox won’t (yet?) provide a real-time, OLTP/OLAP capable database on which multiple insurers can happily dredge their data 24/7.  So does that mean the next opportunity is how to offer that analysis capability to insurers cost-effectively?

Coverbox’s website is already pushing the commodity aspect by telling customers they can choose from a panel of insurers to get the best price.  So insurers will need to position themselves and their value-add offerings quickly in order to “decommoditise” PAYD – otherwise Coverbox’s own message will dominate and part of the opportunity offered by PAYD will disappear.

Crikey…550 words for my first posting…maybe I’ll do a “hello world” next time.

Jamie.

PS The thoughts behind this post have already generated a bit of debate within Smart421, so there may be some follow-up comments coming soon.

Update…I’ve been reading a bit more detail in the Coverbox and CobraWunelli websites.  Still not a huge amount of information regarding how the technology actually works, but it seems that one of the components underlying Coverbox is M2M Connect, the international mobile telemetry platform from Orange.

This is especially interesting for us as Smart421 were involved in the creation of M2M Connect and continue to manage part of this service for Orange.