By Bits launches as COVID-19 changes UK car insurance
Demand for such policies, it claims, has grown following the COVID-19 pandemic, which has seen a large reduction in the need for motorised transport and therefore for annual policies that are priced disproportionately to use.
Addressing this, as well as other issues in modern car insurance underwriting, forms Founder and CEO Callum Rimmer’s key objective:
“Motor insurance pricing is seen as opaque and unfair, and consumers are overwhelmingly dissatisfied with the level of service they are receiving.
“Because it is mandatory if you own a car, motor insurance feels like a tax rather than a purchase decision. This needs to change. Insurance companies urgently need to put the customer first or they risk losing market share and becoming irrelevant.”
Bringing true customer-centricity to insurance
Delivered through a SaaS model, By Bits can be easily integrated into existing systems or exist as a standalone solution.
Providing superior documentation and APIs, insurers can generate data to gain valuable insights into customer behaviour and saving opportunities. The result is truly customer-centric service delivery that forges loyal and enduring relationships with clients.
“An alternative, usage-based solution is more important now than ever, as we see a clear shift in how consumers will use their cars post lockdown,” stated Phil Ost, Head of Personal Lines at Zurich.
Future-proofing motor insurance
Rimmer believes that the By Bits platform can help ‘future proof’ the motor insurance market during a particularly unpredictable time, when technology and shifting customer needs/expectations are making old operating methods obsolete.
“This pandemic has changed driving habits for millions and the need for the whole UK car insurance industry to catch-up to customer expectations, grow with the changing mobility landscape and create the freedom to innovate has never been more pressing,” he continues.
“We hope that in 10 years’ time people see the launch of By Bits as an inflection point in the way motor insurance is delivered, in the same way that retail banking has been transformed over the last few years.”
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.