XPRIMM: Telematics became in the recent years an almost permanent topic on the motor insurers' agenda. Why so?
Mauro CANTONI: I would start answering to your question with a short story which seems to me very meaningful. A few days ago I was with my father and my children and I asked them what it comes to their mind when I say short text dispatching. My father answered the telegraph. My daughter answered What'sApp. If I ask myself, I would say SMS. So, as you may see, in a world rapidly transforming, there is a huge difference of perception between the generations.

But if you think about the insurance industry, nothing has really changed significantly up to now. So, the test I did afterwards was to ask both my father and my daughter what is the mission of an insurance company in their perception. Both of them answered that it is a company that following a payment, promises to refund you in the eventual or possible future damage. In this case, they agreed that an ideal insurer refunds the amount of money to you in a timely manner, whereas my daughter added that the ideal insurer helps you to avoid the damage in the first place, so it means that the way they feel is a little different. The insurer should be not simply someone who covers the risk for you, but somebody who helps you to avoid the risk itself.

What drives the change? I think that things may stay the same for centuries, but if a new technique introduces a net advantage to the stakeholder, then the change happens suddenly. Here is actually the main role to play for the telematics technologies.

Insurance telematics really changed the paradigm from covering the risk to helping to reduce and prevent the risk, introducing a net advantage to all the stakeholders through a mass market technology. You can see that the technology is actually off the shelf. There are always more cars with the device installed. The penetration of the built-in devices is spreading, but the application of the insurance telematics is less widespread, which means that the car makers have a clear understanding of introducing telematics, but they are not yet focusing on insurance telematics.

I see it as an opportunity for insurers, because they can add to the car technology that they can use for their own purposes, so they can tune the technology in the right moment.

XPRIMM: At this point, I think you should tell our readers a few words about your company, your area of business and what it can offer to motor insurers.
M.C.: OCTO was founded in 2002 and started its activity in Italy, quickly expanding in rest of Europe, later on expanding to North America as well. The company's headquarters moved last year in London and we also have offices in Rome, London, Stuttgart, Madrid and Boston, while in the rest of the world we are managing our business through local partners.

As markets are very different each other, of course, we are using very different products, very different service ranges and propositions. Both the products and the approach to the market are different.

To give you an understanding of the growth, this year we have exceeded 4 million connected users and I am proud to say that OCTO has been a category creator in the insurance telematics service landscape and we are still the number one globally in what concerns insurance telematics.

We are focusing on three main markets, which are Italy, for historical reasons and also for objective maturity of the market, U.K. and the U.S, all together representing 90% of insurance telematics globally, we believe.

When we started the business, in 2002, the technology for telematics was already here but it was used more for fleets' management, stolen cars or recovery process. So, our idea was to use this technology to serve the insurance industry and everything we did since the beginning was to modulate the technology to serve that industry and this is still our core business.

We are now growing at a rate of several thousands new customers per day, which is a huge growth. What we do is to collect the data from the car, to send it to the service centre where the enrichment and cleaning phase take place, as well as the processing of the data storage before the dispatching to the customer, who is typically an insurer. The main kind of services we provide for insurance companies is driving scoring and crash and claims services, so we help to both reconstruct the dynamic of the crash and providing assistance to the end user, because we are very keen to serve all the stakeholders, both the policyholder and the insurer.

XPRIMM: Coming back to the technology itself, I understand that the main features are already in place since many years, only that they were not used for insurance purposes.
M.C.: Yes, it is right so. It should be also said that at the beginning of this game there were mainly professional installing devices, but now there are a lot reliable self installing devices, which means that the cost of installation has been cut, which for some markets is significant.

This means that the cost of the solutions, if compared to the premium, becomes affordable in a lot of markets. Generally speaking, you need to introduce a technology whose cost is sustainable with respected to average premium, otherwise you do not succeed. Also, there is now a big potential with the smart phones, because they are using the same technology needed by the insurance telematics: GSM, GPS, GPRS, and accelerometer. So, the technology is already there and the penetration of the smart phones is now very wide. The technology is now easily available. In terms of customer engagement, we provide smart phones or rolling plug-in play solutions. There are solutions which are self-installable by the end user. We also provide predictable risk analysis, CRM tools and sentiment analysis tools.

In terms of claim management, we provide what we call early first notice of loss. Usually, the insurer receives the notification of the crash from the end user. While, with the tools we provide they can reverse this approach, they can become proactive towards the end user. Being immediately notified about the crash, the insurer can contact the customer and offer its assistance, becoming this way a partner instead of a commodity provider. On the other hand, getting in contact with the client at the very first moment after the crash may help in avoiding fraud attempts, third party interferences and also speed up the claim management process. At the end, both the insurer and the client are taking advantage of that.

XPRIMM: Besides the improved claims management, what other support is providing the telematics technology to insurers?
M.C.: I would say that telematics may help insurers in almost any segment of their activity. To start with, improving customers' loyalty through a personalised underwriting is a first benefit. Data accumulated during a year with regard to the customer's driving habits and behaviour, scoring etc. allow insurers to draw a quite precise profile of their customer and thus offer the fairest deal possible. Acquisition of new customers and their selection is the next undisputable value of Telematics.

We have already spoken about the claims management. I would also emphasize that telematics are completely changing the game's paradigm of the C.R.M., providing for tools which allow a permanent, multi-channel communication between the insurer and customer. The end user in the traditional approach of the insurance industry had the opportunity to deal with the insurer in only two cases: when buying the policy and when in case of a claim, both of them being bad experiences and also rare. The new type of communication allows the insurer to reposition itself in a partnership role, always close to its customer needs.

XPRIMM: The benefits brought by telematics for the insureds are obvious, at least in quality of services terms. How would you quantify, in financial terms, the benefits obtained by insurers?
M.C.: The results depend much on the market context, on the customer proposition itself, as well as of the level of systems and processes' integration, penetration of telematics within insurer portfolio etc. In general, the more you integrate, the better the results are, but the results may also change from a small pilot to a big commercial launch and they also depend on the market, because the regulations are not the same.

However, a comparison of claims management results during one year that we have made between two homogeneous Italian groups, a traditional one versus a telematics supported one, showed encouraging results. By using Telematics both number of claims and average claim cost decreased significantly, as fraud cases did. It is also relevant that whiplash claims paid - a very important topic both for the Italian and British markets -, had an important reduction. Of course, as I have said, numbers may differ significantly from one client to another, depending on several factors, but at the end of the day the improvement is visible in each case if the technology is properly implemented.

In fact, the real matter is not whether to introduce telematics or not. Telematics is unavoidable. The real thing is how to use it, because it is a very complex mechanism and you have to deal with a lot of stakeholders: insurers, car makers, and the policy holders. Also, you have to choose among a large range of devices, as well as to deal with a wide service portfolio. In the end, the success depends on the right mix and choosing it is no easy, given the fact that there still not so many examples around.

This is why we offer very modular solutions. So that our customers can take an end to end solutions at the beginning, deciding to eventually insource part of the solution during the adoption path of Telematics. Overall we offer a flexible solution which allow our customers to change their mind in terms of proposition, following needs which evolve along the path.

XPRIMM: The main challenge for the insurers, after deciding to adopt telematics, is to choose what the right solution is for them. But, I assume there is another challenge in terms of cost, not so much for the devices installed on the cars, but for the changes they need to do inside the company. How big is this effort for medium sized insurer?
M.C.: Even here, there are scalable solutions. You can introduce telematics without introducing any kind of integration, because we provide a web platform that insurers can use to access without integration. Of course, this can be used for a limited amount of customers and for a limited time, but at least this allows the insurer to meet time to market needs and an efficient approach, so they can start even without integration.

Then, we allow integration to happen simultaneous with the launching into the market. The thing that brings more benefits is to use the claims system, so the integration at the level of claims process is very important because may help to improve efficiency on two sides: by improving the driving behaviour of the insured, and thus reduce the probability of a crash, on one hand, and to understand the real damage, when the crash happens. If you don't use this option which the technology allows you would lose a lot of potential, you do not unlock the full potential of the telematics. This part needs integration because you need your claim managers use the crash data during the evaluation of the damage. Data are provided through a simple machine to machine interface. This is the protocol: we send these data to the insurer and that part needs integration to unlock the full potential.

XPRIMM: How much is needed a change of mentality within the company in order to implement the telematics technologies?
M.C.: Let's say the challenge is the change management, because if you have worked for decades in a certain way it is not easy to adopt a different way, but you do not need to choose between black and white. You can take it step by step.

XPRIMM: How extended is your presence in the CEE area?
M.C.: We have several projects in the area with one of the most important local insurance players and we are now starting other pilots with other companies. This is an interesting market for us, even though we are aware of the fact that the premiums are quite low and so we need to provide solutions which are coherent with the average premium of these markets.

Fortunately, we have a wide range of solutions. We start with smart phones which are very cheap - because they do not need installation and insurers do not need to buy the device because they are relying on the user's device. Beside this, we have now an agreement with car makers so that you can use the devices already existing on the car. This approach allows the end user not to stress with installation or with buying any hardware. This also complies with the cost issues of those markets. The wide range of solutions we have also means a wide range of choices, so we can adapt to different markets.

XPRIMM: In conclusion, which would be your advice for the CEE insurers?
M.C.: Fist of all, I would say they shouldn't let themselves getting intimidated by the cost issue, because there are lots of solutions available which can fit any size of business.

The second thing is that in any market, there are segments where the premium is high, so you should start with those sectors. I understand that this industry is very prudent, but trying always to be absolutely sure may lead you to do the real mistake: to be a follower and not the pioneer, which would not allow to select the best customers.

If you never truly start, you will not have a clear and real understanding. You need to start, learn from your mistake and continue. The trick is to have a pilot and see what happens. You learn and you will select a partner that can assist when you change propositions, technology, device, target and so on.

I would add, particularly for this region, where there is a harsh competition and pressure on prices, that introducing telematics may introduce a variable which allows insurers to no longer compete only in terms of price. At the moment, every proposition is more or less the same, but introducing a variable you shift the competition from a price one to value one, introducing a unique selling proposition, also helping the market to make a step forward.