In the future this will all be...

Ever wondered what is going to happen in the next few years or beyond that? Well, with my digital crystal ball I’ve come up with a thought or two on where things are headed.

1. The future is going to contain more technology.
It’s going to be faster in its processing (and therefore seemingly more ‘clever’), more usable and even more ubiquitous than it currently is. However (because of this and other factors) it is also going to be more complicated and connected, meaning that even the word we live in now will seem like a pre-industrial medieval state in just a decade or two.
From clothing embedded with NFC chips costing only a few pence that tell you they’ve been at the bottom of the washing basket for over a week, all the way through to comparison websites that automatically compare the information from that telematics insurance box now built into your hybrid electric car.

2. Data is going to be the most valuable currency
We already know that the huge valuations of online services such as Google and Facebook are not just because they have great functionality (such as to link us to our friends & old colleagues) or a great way of finding stuff…  but because they collect, use and continue to build up data on individuals and their habits, preferences, friends and what they had for breakfast. Amplify this fact by an increased population which is online more often via more devices, collecting even more data and you really start to understand how (after water and  perhaps actual currency) data is going to be the most valuable commodity there is.
I’m not suggesting you will always be able to pay for a bottle of water in a street café by giving them your date of birth… but is it that hard to imagine a time when you will be able to use your Starbucks loyalty card to get a free bottle of water in return for signing-up for their new improved reward programme, which just needs to know one piece of information…. Your birthday??

Google is back with car insurance

Has anyone else recently done a search for car insurance?

Well,if you has done this about a month ago you'd have seen the screen shown in my recent posting.

However, I checked Google only recently (e.g. a couple of days ago) and the sponsored link to 'Compare Car Insurance - with Google" has disappeared between the organic and the PPC links.

Well, I checked Google again tonight and low-and-behold, the sponsored link is back.

But with one slight amendment.... where previously the search engine boasted quotes from 120+ providers, the language in the advert has subtly changed to 'Compare up to 110 Insurance Providers'.

Has Google possibly got issues with the number of insurance providers on its panel?

Who do you trust with your Big Data?

OK, I admit it..... I think Big Data is pretty sexy (But then I find anything remotely sexy if I don't fully understand it and want to. Its why I married a woman far more intelligent than me!). And if you're also a regular reader of this blog, you'll have noticed that I've recently been going on about the use of data in the motor insurer and aggregator market.

For me, the challenge with collecting vast amounts of data on each individual person's activity, such as driving speed and their late night policy breaking trip to the nearest supermarket, isn't about how an insurance company is going to calculate exactly how much extra to charge you for running out after midnight for those cigarettes, nappies, etc. but how you are going to get hold of that data when you decide to change suppliers. Because surely if you find it difficulty to move your own data away from one company who stores your data, they have an advantage over you?

So surely the answer is to not put your data with any one specific insurance company, as they could well have the advantage mentioned above. But to put your data in the hands of an intermediary service.

But again, you have the issue of who you trust to hold this data on your behalf. Perhaps a company with the infrastructure to easily hold your data securely, who can have access to a complex search service to be able to find trends in big data and who understands the online insurance aggregation market?

Which company could provide such a service? I must Google it......

Big data and telematics insurance challenge

In my research on the development of the telematics and the insurance industry  I have realised that my slide and previous post on the maturity of the aggregators needs to change. This is caused by the addition of data..... Big data!

As premiums get more specific to the individual driving behaviour and more data is collected on each policy holder, there are questions that I've got:

1. If I want to have access to all the data about my driving behaviour, can I?
2. How much data is this and how do I get it & store it?
3. How do I provide this data to another potential insurer to be able to compare their premium?
4. How would I then provide it to several insurers at the same time as part of an aggregate service and are they able to produce comparable policies?

So far there doesn't seem to be any easy way of taking one set of telematics driving data and moving it across to another company. Surely this will become of more and more concern to drivers and also to the people that set legal policy & regulations? So if the Data Commissioner's office and even the financial service regulation bodies are not taking an obvious interest, you can be pretty sure they will do soon.

In the end, telematics does not become an issue about creating a comparable policy from insurer to insurer, it is about the bigger issue of how user data is collected, where and who stores it, who has access to it (with and without the insurers permission) and what eventual use this is put to.

Will telematics save us from aggregators?

If you read my earlier postings on telematics (otherwise known as 'black box' or GPS car insurance) and the recent post on the new insurance aggregation service provided by Google, you may have combined these two things. You may have then, like me, asked how motor insurance comparison will work for those who opt for a little electronic box in the boot of their car.

In theory, telematics should give more personalised insurance premiums, as more data is collected and more relevant policies are created for each driver. The technology is used already in Brazil, South Africa and now also Australia, which have all apparently seen reductions in road deaths as a consequence.

UK insurers are starting to get more interested in telematics and so is Go Compare, one of the UK's leading aggregators. Go Compare initially approached telematics provider Wunelli to work on a 'black box comparison site' to understand more about telematics products. This led to Wunelli spending six months developing Compare the Box's price and product comparison facility.
http://www.comparethebox.com/

So far each insurer is compared using a number of a number of factors, including the location of the car and time driven (some charge extra for late night driving), but also other more detailed information such as acceleration, braking & cornering.

Back in April 2012, Compare the Box was the only telematics insurance aggregation website. But if the history of the web has told us anything, it is that when something unique and successful is developed..... a number of other similar services rush into this space very quickly.

Telematics : the future of car insurance?

Telematics in its most general sense is the combination of technology and moving vehicles. However this is most generally used when referring to the tracking of motors via GPS technology and therefore it's application in vehicle insurance.

There are several ways this technology can be used and insurance companies are still looking at different ways to best offer a product to the motor market. Some providers offering a ‘pay-as-you-drive’ model similar to the way you get ‘pay-as-you-go’ tariffs for mobile phones. But others can set up restrictions for drivers, with time and geography both being possible means of restricting customers.

This in theory means they can keep premiums low by agreeing with customers that they will avoid high risk / cost activity (e.g. Away from accident black spots) or only do a specific amount of annual mileage.
Taking this only a tiny step further, this therefore can be a system for rewarding the insured for positive driving.

That little box of electronics in the boot will know everywhere you go, the speed you do it and the time you got there... then it will always report this activity back. Making it a cross between the black box flight recorder, your little brother and a trucker's tachograph.

The impact of Google aggregating insurance

I thought I'd follow up my earlier post, where I mentioned how the entrance of Google into the online UK insurance space was more of an issue for the aggregators than the individual insurers or brokers.
Note: those brands you think are insuring your car are actually fairly likely to be brokers, trying to earn a profit by selling you insurance from a smaller set of insurers.

In 2010 over 50% of all private car insurance was purchased with the use of the Internet, so it is only sensible to assume that has only increased over the last 18 months. It's therefore surprising that many insurance brands in the UK have made the decision not to have a large online marketing presence and take advantage of this traffic and growth. Sure, some companies are targeting organic or paid search online, but the major search terms are now pretty much dominated by the primary aggregators (MoneySupermarket, GoCompare, Compare The Market & Confused)*.

Either through a conscious decision, a lack of securing funds or some other factor, many insurance companies now accept the dominant role of the aggregators and pay them handsomely. In fact some even accept that up to 80% (or possibly more) of their business comes from the big players.

This current situation may not be permanent, but climbing above the big aggregation and comparison sites in either SEO or PPC is something that would take a lot of time, effort, skill and therefore money.

And this is why aggregators have more to lose now than the companies they provide customers to. They have more at stake when the biggest search engine places its own sponsored box just beneath the top two PPC adverts on a search results page. In effect giving itself a free third place listing and thus siting this service above the organic results.

For any other company this third place Pay-per-click position and top SEO place would cost a fortune to establish and maintain. Save nothing of the improved experience of a comparison service being built into the search journey.

*Sure some are spending significantly on TV (e.g. Direct Line, which is trying all it can to build brand loyalty in the run up to its proposed extraction from the now mainly Government-owned RBS group), but these cases are the exception.

Google enters UK insurance comparison market

The big news in the UK motor insurance market over the last few days has to be the entrance of a new comparison site. Usually this wouldn't be big thing, as there are a number of established players already fighting over each other to grab the remaining market share from the insurance companies they supply with leads.
However in case you're not aware, this isn't just another small startup hoping to grab a small but growing piece of the action. This is one of the biggest Internet companies out there..... Google.

Now, when searching for things such as "cheap car insurance", in addition to a couple of pay-per-click adverts appearing about the search results.... you now also get a box sponsored by Google above the search results that then takes you into a price comparison engine process that compares prices from over 120 insurance companies and brokers.

So whilst this means that insurance companies now have a new and significant entrant into the market that has a considerable influence over the search market (to say the least), I can't help but think that this move by Google is a more significant one for the aggregators.

What your insurance website UX says about you

I've been reviewing a number of insurance websites lately and have been genuinely surprised by the poor user experience they have.

Its not just a few tiny things either..... There's some pretty important issues you can find if you take the time (and boy have I!). These issues include: a lack of contextual help, incorrect or missing error messaging, system time-outs for no apparent reason and accessibility failings nearly across the board.

Are we actually in the 21st Century?

Surely these pretty basic failings (that are more suited to sites 10 or more years ago) actually tell us something about the companies that create them and rely on them as an important revenue stream?
IMHO is says they are still treating the digital channel as an addition to their traditional business.... Even if the web makes up the majority of their revenue now.

It's not all negatives though. Some insurance company sites I've looked at do cover (most of) these essential requirements and a few provide an intuitive experience that seems to have the right balance of mandatory information fields and optimised user journey. These organisations have obviously taken a more considered and user-centred approach. It shows.

Companies in every market really need to keep developing and evolving their ecommerce experience, with insurance companies being no exception.
Because if you don't, then your users will notice and vote with their mice.

Aggregation and the Herfindahl index

The Herfindahl Index (AKA the Hirschman-Herfindahl Index or HHI) is a measurement of the competitiveness of a particular industry. The index gives a figure between 0 and 1, with those markets closest to zero being more competitive and those closest to 1 being an (almost) monopoly.


An increase in the index typically means that there’s been a decrease in competition and therefore greater market power to those still operating. Whereas a decrease towards zero indicates more companies fighting over the same customer base and therefore the existence of a more ‘perfect’ and competitive market.
So why is the Herfindahl Index important in the online aggregators markets? Well, over the last decade, the appearance of aggregators in different online markets has created a more level playing field for customers; by collating the rates and fees for different suppliers and presenting them to the online user in an easy-to-compare format. Therefore in those markets where price is so-often the defining decision factor, such as utilities, financial services and travel, the use of aggregators increases competition and pushes the Herfindahl Index figure closer to zero.

Take the UK motor insurance market right now. As you will see from the diagram below (sourced from Towers Watson’s report ‘why aren’t we making money’
www.towerswatson.com/assets/.../Why-arent-we-making-money.pdf

In the last 10 years (really since the appearance of confused.com which was the first UK motor insurance aggregator) the HHI has moved closer to zero.

So what are the implications of this? Well, if anything is predictable, it is that the UK motor insurance market is going to get more (not less) price sensitive over the next few years, becoming more like the oil and airline industry in its competitiveness, unless something happens to interrupt this trend……