Tuesday, November 3rd 2015
Written by Lum Ka Kay
As appeared on Digital News Asia
- Helps insurers identify high-risk drivers and reduce claims loss by 40%
- Plans to raise US$3mil seed funding, saying it’s a long-term project
THE motor insurance sector in Malaysia suffered losses of US$51.5 (RM221 million) in the first half of 2015 due to increased damage and theft claims.
No surprise – according to Pemandu (the Performance Management & Delivery Unit of the Prime Minister’s Department), a car is stolen every 45 minutes in Malaysia.
After having a close friend and his own brother lose their cars in the same week in 2013, Syed Ahmad Fuqaha Sd. Agil decided enough was enough. He wanted to do his part in reducing vehicle theft and increasing road safety awareness.
So he founded Pixelated Sdn Bhd, where he is managing director, which developed Katsana, a Global Positioning System (GPS) navigation solution that tracks vehicles.
Fuqaha claimed that to date, Katsana has recovered 45 of the 46 missing cars which uses its car-tracking system – that’s a 98% success rate.
After further looking at the market, and with a desire to set themselves apart, Fuqaha and cofounder Mohd Irwan Ibrahim turned their focus towards helping motor insurers lower their claims loss – and to also prepare for the de-tariffication of motor insurance premiums in 2016.
“Once this comes into effect, it might burden consumers because to make up for their losses over past years, insurance companies may price their premiums at a higher rate,” Fuqaha told Digital News Asia (DNA) in Kuala Lumpur.
He said that with Katsana Insights (pic below), due to be launched this month, insurance companies will have customer data that would allow them to price their premiums according to driver profiles, instead of raising premium rates across the board.
Fuqaha is even confident that Katsana would allow insurers to reduce their claims losses by at least 40%.
Win-win-win
To help do that, the startup will collaborate with insurance companies to provide the Katsana GPS tracking system for free to their customers.
“If our data shows that you’re a low-risk driver by the end of your contract, you get to pay less for your premium,” said Fuqaha.
“It’s sort of like an incentive, where if a driver drives safely, he or she gets to save money by paying cheaper premiums,” he added.
Fuqaha said that Katsana is currently in talks with several insurance companies, but he declined to identify them.
“In return, we share the profits gained by insurance companies when their losses are reduced.
“For insurance companies, they don’t have to fork out money for Katsana to reduce claims loss; for consumers, they get our system and product for free, along with a lowered premium rate if they drive safely; and for us, we get to collect data from all the drivers.
“So it’s a win-win-win situation,” he declared, adding that he believed this would eventually lower vehicle accident rates in Malaysia, thus lowering claims loss among motor insurers.
Fuqaha conceded that the model is not new, as companies such as Progressive and ingenie in the West have come out with risk-profiling methods to help lower claims loss for motor insurers and reduce road deaths, especially among young drivers.
In Malaysia, 24 out of 100,000 drivers lose their lives on the road each year, according to the World Health Organisation Global Status Report on Road Safety 2015 report, a higher than average number of road deaths compared with other countries.
When asked if Katsana would introduce a subscription fee after it has established itself in the insurance sector, Fuqaha said: “It’s not something we will do because we are trying to lower consumers’ burden by lowering premium rates.
“If we introduce subscription fees, it won’t fit what we’re trying to do,” he added.
Customer wins, funding drive
Meanwhile, Katsana’s GPS solution is continuing to make its mark in the enterprise world, according to Fuqaha.
“MetroBus was our first enterprise customer and from there on, we got more and more enterprise customers,” he said, adding that 90% of Katsana-installed vehicles are owned by enterprise clients.
Fuqaha said the reason for this was because Katsana provides precise behavioural data, adding that the solution processes up to six million pieces of location data from vehicles with its tracking system, where data is updated every 10 seconds.
“This means employers can track where the driver went, where and how long he stopped, the amount of fuel used, and driving speed.
“Employers can take action against their drivers if they find anything fishy going on, say fuel siphoning,” he said.
Meanwhile Irwan, who is also the chief operating officer, said that the startup began to see a profit two months after its inception in April 2014.
“During that time, our monthly growth rate was about 50% until we hit about RM70,000 of monthly revenue.
“After that, it’s been about a 5% average growth rate each month,” he said. [RM1 = US$0.24]
Irwan said Katsana was initially funded by an angel investor, whom he did not name. It has since been depending on revenue generated by its vehicle-tracking system, buoyed as well by a US$116,496 (RM500,000) grant by the Malaysian Government’s Bumiputera Agenda Steering Unit (Teraju) Superb programme in 2014.
However, for the company to make an impact on the insurance sector with its Katsana Insights solution, where it will be providing free products to insurance clients, Irwan said the startup would require more capital.
“For Katsana insights, we’re already in talk with several VCs (venture capitalists) – we need them to understand that what we’re doing is a long-term project where profit won’t be realised in the short term.
“So for our seed funding, we plan to raise US$3million for Katsana Insights,” he said, adding that based on its calculations, Katsana Insights will only start turning in a profit in the middle of the second year after its November launch.
“We target to install Katsana on at least 1,000 vehicles a month for this project,” he said.