Written evidence submitted by Carrot Insurance
- Carrot Insurance, part of Trak Global Group, welcomes the opportunity to respond to the Transport Select Committee’s inquiry into the reasons why young and novice drivers are at a higher risk of being involved in a road traffic collision, and what the Government can do to reduce these risks.
- Carrot Insurance (Carrot) is a wholly-owned subsidiary of Trak Global Group (TGG). In the UK, Carrot is an award-winning B2C telematics insurance provider, but the underpinning platform has now been made available internationally to enable any organisation seeking to take a UBI proposition to market to do so quickly and with a high degree of configurability. By using telematics hardware and smartphone apps to provide feedback, messaging and rewards to incentivise better driving behaviours, the Carrot approach is proven to help reduce claims frequency – this in turn reduces insurance premiums for policyholders and increases customer satisfaction, and reduces losses for insurers.
- More info at www.carrotinsurance.com and www.ims.tech.
- We offer one of the UK’s best UBI (Usage Based Insurance) products which includes black box technology to record driving patterns of new and young drivers aged between 17-25. Our installed black box technology is primarily designed for new drivers while the app (better driver) is for drivers with more than 12 months experience.
- Trak Global Group’s companies share a common passion for improving road safety and providing connected technologies, advanced data analytics and highly-skilled teams to shape the future of road safety solutions. Carrot is built on IMS DriveSync technology. Over 3.5 million vehicles have been connected to the IMS DriveSync platform. Carrot’s parent company, Trak Global, acquired IMS (a Canadian telematics technology company) in December 2018.
Our key points summary
- Telematics insurance for novice drivers (as well as drivers with a year or more experience) is proven to reduce accidents and improve driver behaviour
- Good driving behaviour via telematics is sustained into adult driving careers.
- The ‘carrot not stick’ philosophy adopted by Carrot turns the traditional young driver model on its head by incentivising good driving behaviour.
- In a digital era, there are a whole host of educational tools that can assist the development of good driving behaviour, such as Carrot’s PaceNotes app.
- Government can implement fiscal incentives to encourage more young people to use telematics devices
- Carrot differs from its peers in that from its launch in 2012 it adopted a ‘carrot, not stick,’ strategy. This meant that rather than being penalised for driving badly, Carrot customers were rewarded for driving well. Customers can check their weekly scores via their smartphone app.
- The business introduced active risk management to its operations, intervening by phone and virtually to help customers become safer drivers. The results have underlined the benefits of our approach to improvements in young driver safety on the roads:
- Carrot has overseen a 42% reduction in the number of accidents among its customer base compared to customers of the same age group on conventional policies
- Carrot has handed back £4.1m to our customers during the past seven years
- Carrot partner insurers have benefited too, by an average 7.0 per cent fall in their combined operating ratios.
- 20% of Carrot’s staff work on the risk management area of the business
- In 2019 the team made 11,893 interventions to customers. Of these 74% of drivers contacted improved their driving behaviour and received no further warnings.
- Carrot found that customers who regularly check their driving behaviour on their app more than four times a week are 39% less likely to have an accident, so the rewards programme incentivises customers to check their status, and by doing so frequently, they drive better. As the scores improve, so do insurer loss ratios. For every two-point uptick in driver scoring across the Carrot portfolio, loss ratios improve by 14%. The improvement in loss ratios has had the added advantage of making this segment of the insurance market profitable for insurers again, creating more insurance choice for young drivers.
- Driver behaviour is scored using a green, amber and red system, calculated by three main factors, speed, smoothness and usage. Policyholders are only at risk of cancellation should they get two consecutive red weeks, or four in the aggregate over the policy period. We found that 64% of our drivers maintain a positive score throughout the lifetime of their policy and 794 (5.5%) policyholders aged between 17-25 are speeding/driving recklessly.
- Policyholders are given access to their scores through their app or online dashboard to enable them to monitor their scores themselves, we also contact them after each red week to remind them of the consequences of achieving further red weeks. Carrot has also got a programme in place called The Driving Doctor which customers have the option to participate in following their first red week. If they do take part, they are asked to watch a series of short videos and answer a short quiz. If they pass, the red week is removed putting them back into the position they were in before the red week was issued.
- Carrot’s ‘wedge’ accident detection technology generates First-Notification-of-Loss (FNOL) alerts electronically in response to crash events and is a proven time-saving, way to assist policyholders and communicate with emergency contacts and tow services. Since 2012, Carrot have worked with insurers on over 14,000 customer claims where telematics have been used.
- PaceNotes is a smartphone app for learner drivers and their instructors, developed by Trak Global and launched in 2019. The group worked closely with Highways England, the Driver and Vehicle Standards Agency (DVSA), and driving instructor associations to develop the tool.
- The app makes new drivers safer by clocking up at least 40 hours’ motoring while they’re learning, in a range of different environments including in the dark and rain, and on motorways and narrow country roads. PaceNotes tracks and shows the amount of time they have spent driving on different road types, records the conditions they’ve experienced, and highlights the areas they still need to cover.
- Driving instructors can sign up for a free PaceNotes instructor account and online dashboard that collates the lessons and accompanied practise undertaken by their pupils. They can use this to create bespoke learning programmes and to encourage pupils to practice in various environments and conditions.
- PaceNotes helps change learners’ attitudes and become safer through experience – also reducing their risk profile when they drive on the roads alone. Parents can also use the app to help them understand where their children need to improve, and to give them more confidence if they take their children out on the roads themselves. And it will be helpful when they’re selecting instructors, as a demonstration of commitment to safety. Many instructors already track their pupils’ progress but PaceNotes builds on this by providing learners and their parents with an engaging, interactive way to illustrate progress and highlight gaps in their learning.
- How the Government can introduce and promote telematics insurance
- Industry and government need to work in partnership to educate the public about the benefits of telematics beyond the premium reduction. Awareness of telematics has improved with increased usage telematics, but too many people still associate ‘telematics’ with curfews, limited mileage, being tracked and removal of privacy.
- There are proven road safety benefits from the technology (and the associated add-ons such as PaceNotes and Wedge. We also believe that young and novice drivers who take out our installed black box product for their first years driving keep their behavioural habits as they become more experienced; once a good driver, always a good driver, as it were.
- We believe the benefits are so compelling that new drivers should be incentivised to utilise at least their first year’s driving through year with a telematics company before being given the choice to move on to a regular insurance product.
- The average premium for 17-22 year-old drivers is nearly £1,449 (Source: CTM https://www.telegraph.co.uk/financial-services/insurance/car-insurance/how-to-get-cheap-car-insurance-for-young-drivers/) annually, compared to the national average of approximately £471 (Source: ABI https://www.finder.com/uk/how-much-does-car-insurance-cost), “meaning young drivers pay more than double the amount of IPT than, say, their parents.”
- In 2016, Carrot customers paid well over £2.0m in IPT, but on average the company saves insurers over £5m each year in lower claims costs because Carrot drivers have fewer accidents than those who don’t use their telematics insurance product.
- If you include taxpayer savings that accrue from making less use of the emergency services, healthcare and rehabilitation, the multiplier effect of reduced accidents adds up to many millions of pounds of benefit from Carrot alone. Giving a fiscal nudge to encourage young people to opt for telematics-based car insurance will enable the Government to make a major contribution to road safety.