Mike Brockman is a visionary in the insurance industry after founding insurethebox, which uses black box telematics tech inside cars to collect driver data, and now making "every car a smart car" with his super dash cam start-up ThingCo
In a 38-year career, Mike Brockman has been one of the insurance industry’s biggest innovators after pioneering the “black box” in-car device at insurethebox. After forming new start-up ThingCo to take forward the connected car trend, he sits down with Dan Robinson to tell his story and offer his view on role of technology in the industry’s future
One of the worst days in Mike Brockman’s life was his daughter’s 18th birthday party, when his garden in Epsom, Surrey, played host to 170 youngsters.
There was alcohol, a nightclub DJ, bust-ups and a visit from the council’s environmental health team – but he learned something that day which would prove useful to his new business at the time.
Insurethebox had not long been set up as a motor insurance company with a difference, fitting a “black box” into young people’s cars to collect their driving data and – should they prove to be safe behind the wheel – offer far cheaper premiums in a marketplace that penalised them for age.
It was a concept that had already been experimented with by one of the industry’s big players but the “nightmare” party reinforced to Mike the varying personalities existing in this age group – and how this could make it worth insurers forking out almost £200 a time to fit the device when margins were so low.
“What I realised when you have those youngsters all together is you’ve got the complete nutters who you don’t want your daughter to marry, but those are the ones she’s interested in,” he says.
“Then there’s the nice quiet ones who you do want your daughter to marry but she’s not bothered about those ones at that age.
“And that reflects their driving behaviour because the morning after the party, when they all drive their cars away, you hear the ones screeching away at 100mph and the others who are quiet – and it matches their personalities.
“So the range of risk with young people is huge, from the complete nutters to the sensible ones.
“And my business model was that if I could just capture this bottom quartile who are safer, the risk spectrum for premiums is a lot smaller – and it worked like a dream.”
How Mike Brockman built a career in insurance
It might be a rather strange analogy for how insurethebox came to be the world’s first telematics-only insurer, but Mike has shown good instincts throughout a 38-year career in insurance.
The 61-year-old has never been comfortable with sitting still and has forged a reputation as one of the industry’s most respected visionaries and disruptors.
Starting out as an actuary – someone who compiles and analyses statistics to work out insurance risks and premiums, and a role for which he received an award from the Institute of Actuaries – his first company EMB Consultancy was set up in 1993.
At the time, he was a junior partner at former London actuary firm Bacon & Woodrow, when he spotted an opportunity.
Mike recalls: “My bit of the business in Bacon & Woodrow was small but expanding and there was another guy there who wanted to be a partner but got rejected.
“He was a wizard in programming but the partners didn’t understand software because PCs were only just coming on board.
“So I said to him ‘if they don’t understand the power of software and how that gets clients, let’s just go off and do it on our own’.
“I got the clients and he did the software, and it was incredibly successful.”
EMB employed 350 people across 11 offices, including its headquarters in Epsom, and advised some of the world’s major insurance firms.
But by 2009, he was ready to move on and sold the company to multinational insurer Willis Towers Watson.
Even now, the software his company made two decades ago is used by insurers from across the industry and continues to win awards.
But while Mike may sometimes question the sanity of his decision to sell that business, so prolonged has its success been, he couldn’t resist the excitement he felt after spotting an opportunity in telematics.
The technology uses wireless data communication to collect key information about vehicles and driving behaviour that can be sent to an insurer. Already popular in fleets of heavy goods vehicles, it would soon be adopted by car owners.
Story behind Mike Brockman and insurethebox
Rewind five years before the EMB buyout, and Norwich Union – the well-known UK insurer now part of Aviva – had come up with the idea of installing a so-called black box device inside cars to collect this data.
It believed the technology could revolutionise motor insurance and launched a “pay-as-you-drive” policy that could provide performance-based rebates in 2004.
But it was a failure and the company dropped the offer after four years, with take-up slower than expected.
It hardly stirred the industry to adopt similar policies, but one person was undeterred.
“I looked at this model and thought it’s absolutely brilliant what Norwich Union has done, even though it’s lost a complete fortune,” says Mike.
“It only failed because the company did it wrong, not because the idea was bad, so I knew I could make it better.
“The only way to make it work was to build an insurance company where all the technology was embedded within the operational processes, so all the underwriting, data analytics and IT support – the whole service side and claims-handling operation – had to be living and breathing so it could take advantage of the technology.”
One of the challenges Mike faced was that the actual black box cost an insurer £140 for the device and £50 to have it installed.
He adds: “Motor insurance in the UK is one of the most competitive markets in the world.
“Insurance companies aren’t creaming a lot of money, as consumers might think. The margins are very small and it’s very competitive.
“So the question was – and this is what Norwich Union couldn’t work out – how do you add a cost to your business that’s almost £200 in the most competitive market in the world, where the average premiums were probably £350? How do you make the economics work?”
The Norwich Union model had put the devices into cars and charged drivers per mile, but this amount increased in “riskier” situations such as night time – effectively penalising customers if they didn’t do what the insurer wanted them to do.
“The first mistake it made was to design a product it wanted to sell, not one consumers wanted to buy,” says Mike.
“That’s a big mistake in any business because you should always design a product for your customers.”
While many customers decided against having the black boxes in their cars, those who did want it were the ones driving no more than 200 miles a year and often the safest. They were also mainly young.
Mike identified that young drivers “hated” insurers because their premiums were around the £3,000 to £4,000 mark due to their “high risk” categorisation.
But by using technology to “de-risk” them, it ensured insurers could offer cheaper policies while also covering the costs of the equipment.
Finally, he’d worked out how to make economic sense of a pay-as-you-drive plan and also threw in an incentive scheme, in which policyholders could be rewarded with extra miles on top of what they had paid for each month if they drove safely.
What is insurethebox?
Armed with this confidence, he set up Insure the Box Limited – trading as insurethebox – in May 2009.
It had a mission to make roads safer and bring down the cost of insurance, particularly for new, young and low-mileage drivers by fitting their cars with the black box data collection technology.
Which brings us back to dad-of-three Mike’s analogy from his daughter’s party and his realisation that there was a way to sift through an age bracket that was generalised by the industry.
“When we started, there were people who said ‘I don’t mind having a black box, I’m a safe driver’,” he says.
“Those who weren’t going to drive safely didn’t bother getting one. So there was a natural selection effect where the only customers who you’d attract would be the better drivers.”
While plenty of other insurers drew inspiration from insurethebox to provide their own black box motor cover policies, Mike says it remains unique as the only company providing telematics-only insurance.
It has now sold more than 800,000 policies, with gross written premium (GWP) equivalent to nearly £1bn in total – or £135m annually – and boasting a 25% market share in telematics insurance.
The company, which employs 350 people at its head office in Newcastle, has also collected more than three billion miles of driving data, including information on 100,000 accidents.
Mike claims telematics are the first example of the Internet of Things (IoT) – a concept that describes devices connected to the internet communicating with each other and exchanging data.
He says: “It’s something that’s everywhere now but I’ve been doing it for ten years because real-time information is what IoT is about.
“People are talking a lot now about cyber security and data privacy, which is something I’ve lived and breathed for more than ten years.
“We were collecting thousands of bits of information every second about how people drive and how you price renewals, so you can offer a much better deal if they’re a good driver.
“It completely changed the way we did everything.”
More change was to come though.
Mike Brockman leaves insurethebox and sets up ThingCo
“I don’t like working for anyone else,” Mike candidly admits. Which explains why the serial entrepreneur didn’t have much hesitation in pressing the eject button once it became clear he would soon have to answer to someone else at insurethebox.
Building a relatively big insurer doesn’t come cheap and Mike says he was about £40m in debt at one point after borrowing heavily.
Due to a complex combination of circumstances involving the lender, he ended up selling three-quarters of the business to Japanese insurance giant MS&AD Insurance Group’s subsidiary Aioi Nissay Dowa Insurance in 2015.
The new parent company has a strong relationship with Toyota and wanted insurethebox’s telematics expertise to support the manufacturer’s connected car strategy.
Mike admits he felt like a “tiger in a cage” as he couldn’t bring his ideas to fruition at the same pace as he could independently, and eventually sold his remaining shares early last year.
His only condition was to be allowed the take a project he was working on behind the scenes with him.
It involved looking at next-generation telematics and would become ThingCo, an insurtech company he set up in January 2018.
The black box is now more than a decade old and Mike’s latest goal is to turn every vehicle into a “connected car” – one that has a wireless internet connection and can have its key functions controlled with a mobile app.
“For young people, it almost became the norm that if you’re going to have a car and insurance, you’d have to have a box in your car because it’s the only way to get a reasonable premium,” he says.
“So this natural selection process we had at first was diminishing, and the economics were getting harder and harder.
“So if you want to take it to the next level, you need to change your model completely.”
What is ThingCo’s super dash cam Theo?
“This is a known blackspot area – be sure to look right at the end of the road.”
Theo can talk a driver throughout a journey by pointing out any hazards or information they might need to be aware about.
This is the new black box device created by ThingCo. It’s 4G-enabled and features telematics, HD cameras, an advanced driver-assistance system (ADAS) underpinned by artificial intelligence and voice recognition technology, and an app.
While many vehicles are equipped with dash cams (dashboard cameras) that can record accidents to help establish the circumstances – and blame for the insurer’s benefit – Theo is being talked about as the world’s first “super dash cam”.
If a vehicle is drifting into another lane or gets too close to a barrier or road edge, the device issues a warning, while it has image recognition technology for identifying faces and car registration plates.
It uses Amazon Lex intelligent voice command technology, which underpins the Alexa smart voice assistant, so a driver can talk to the device about their condition if they have been in a crash.
A collision is also automatically recognised by the technology, which is able to instantly notify an accident centre to send help from emergency services.
AI-based algorithms working behind the scenes are able to help detect who is at fault, and become more intelligent over time as they learn more about the driver’s behaviour behind the wheel.
It also comes with a more elegant, circular design – it can be fitted on a windscreen without dangling wires – and Mike believes it will be more desirable as a consumable in its own right, regardless of the insurance aspect.
He says: “One million people are buying a dash cam in the UK in case they have a crash, but people have a crash once every ten years.
“So it’s sitting on your dashboard doing nothing. It gives you security for something that might not happen – it’s an odd sort of buy, really.
“We’re saying you could have a super dash cam that turns any car into a smart car.”
Mike Brockman on insuring connected cars
Of course, Mike’s an insurer at heart and Theo is ultimately a product for insurance companies.
The box can collect 1,000 bits of information every second, running on the Amazon Web Services cloud technology that Mike believes will be “transformational” for his industry.
But as it’s a product bought by the consumer at about £220, along with a £4.99 monthly subscription fee, the difference is the data is owned by the customer and not the car manufacturer or insurer.
This means the information can be used to benefit drivers in order to get cheaper policies, should they wish.
Theo comes with an app, which connects users with partnering cover providers that will offer the best deals based on the driver data in a reverse auction style.
And it doesn’t just link up with the insurance industry, with a list of partners including Just Eat, Dominos, Deliveroo and Amazon able to offer rewards for good driving.
Mike adds: “It’s an insurance product – from an insurer’s point of view, it’s great because it can reduce the number of accidents and we’re providing a new distribution channel – but I don’t want it to be thought about as only insurance.
“I don’t want to be a tech company either. All this is about humanising the technology and insurance.
“It’s the services we’re powering – it’s about helping people, keeping them safe and rewarding them.
“Ultimately, the technology is there to help the driver, not the insurer.”
What does the future hold for Mike Brockman?
With a full launch of Theo imminent – it’s already been soft launched in Manchester and ThingCo’s 12-strong team is due to move into an office next door to insurethebox at Newcastle’s Quorum Business Park – Mike will be busy trying to establish the product in the UK, before expanding to markets in the likes of Italy, Germany, China and Japan.
He wants to show how it can be used for social good, pointing out how, for example, it could help keep elderly people safe while ensuring they retain the independence afforded to them by driving.
And while he will need insurers to come on board to make the device work, he’s confident that shouldn’t be too much of a problem.
“I set up ThingsCo at 60 because the thought of retirement terrifies me, but I’m also a bit of a visionary,” adds Mike, who maintains a young outlook by surrounding himself with staff in their 20s.
“I look to the future and always think of new stuff I can do.
“I’m too old to have the patience in convincing people to do things, and I’m lucky that with my old businesses, I can just reinvest into my new venture rather than having to convince people about it.
“The insurance industry is incredibly conservative and doesn’t embrace new things very easily, but it will do once it sees what’s going on.”