Sometimes a new technology can shake the very foundations of an industry and a well-placed visionary leads the way. Insurance claims outsourcer and bulletin board hot topic Quindell (QPP:AIM) is just that sort of visionary, telematics is just that sort of transformational technology.
Today's detailed announcement of a 'connected car' joint venture (JV) alongside the RAC hold enormous promise for the company. The JV is being named Connected Car Solutions (CS) and will be owned 51% by Quindell, with the remaining 49% stake by the RAC, and will be initially funded to the tune of £15 million each at first.
The focal point is the black boxes that get fitted to cars and the supplied data. Using crash detection technology from partner Himex, Quindell will not only be able to monitor driving habits, it'll be able to identify a prang by one of its users in real-time and contact the customers immediately, smoothing out the bumps of an otherwise unpleasant experience. By taking quick control of the entire claims experience, from car repair and replacement to medical reporting and rehab.
That's genuine upsell potential to RAC policyholders in the UK and Canada, and a possible long tail of subscription revenue for Quindell. The company estimates up $5 to $15 per policy, per month. Estimates used by broker Cenkos are pitched at $7, implying just over $1 billion a year, with considerable potential upside to that forecast.
Quindell reckons its own market research suggest 80% of people surveyed would happily take a free-to-fit black box if it could help cut insurance premiums, so the market opportunity is ripe. CCS will roll-out telematics kit to the RAC’s 2.1 million breakdown customers, although there's scope long-term to extend the arrangement right across the RAC's 7 million-strong business and consumer policyholders. CCS plans to install about 50,000 telematics boxes a month this year with a target of 100,000 a month through 2015. Fit outs will start in July.
Cenkos responds by raising its Quindell share price target from 86p to 90p, although it's worth remembering that this target was raised from 80p after last week's full-year results, so that's a 12.5% hike in a week. With Quindell's long-mooted main market switch set for June, alongside a planned share consolidation, that will instantly propel Quindell into the FTSE 250 index, suddenly the group's FTSE 100 ambitions, first flagged by Shares in October, don't look so aggressive.