Local start-up Koba has signed an exclusive licence and partnership deal with London-based technology platform By Bits for the Australian and New Zealand markets as it readies to offer pay-per-kilometre car insurance to local drivers.

Securing access to By Bits technology will be a “huge accelerator,” Koba says, and enable it to bring its usage-based insurance to Australia’s 10 million low mileage drivers for the first time.

Founder Andrew Wong says partnering with By Bits gives the “first mover advantage, without the pain of product development”.

“By Bits puts us in the fast lane,” Mr Wong says. “The partnership means we’ll be able to scale at speed and drive change in the Australian market much faster.”

The flexible, pay-per-kilometre car insurance offer is aimed at low-usage drivers who can connect directly through their driving app, an on-board device or smart phone.

Koba’s website, which says the insurance company is on-track to launch in July, estimates lower mileage drivers can save as much as 40% on comprehensive cover. It says it will offer transparent pricing and in-app services, like a car locator function and hail alerts.

Mr Wong returned to Melbourne last year after some time in Silicon Valley and says the idea for Koba arrived with the COVID-19 pandemic and a desire to disrupt and “change up” the car insurance industry.

“COVID brought the world to a stand-still and while we were all indoors, our cars were too – sitting idle in the garage,” the website says. “Why were we paying the same expensive premiums, even though we were driving far less? And so, Koba was born.”

During COVID, Koba says Australian car insurance companies made around $800 million in additional profit due to lower claims.

Koba is a “fairer” solution, Mr Wong says, which offers low-usage drivers transparency in pricing, satisfies a desire for cheaper insurance and also maintains stable margins for insurers.

By Bits, founded in December, is a software as a service (SaaS) technology provider headed by Callum Rimmer, who says the platform “future-proofs insurers in an unpredictable market”.

In 2016, Mr Rimmer co-founded By Miles which says it was the UK’s first pay-by-mile insurance offer and the world’s first “connected” car policy using data directly from car manufacturers.

In December, Koba was supported by Insurtech Gateway Australia and the Hunter Equity Group in a successful $250,000 round of pre-seed funding. It is now working towards a launch date as it gathers interest for its insurance via registrations at its website.

“Once we hit our early growth and risk milestones, we will open a funding round to enable rapid scaling throughout Australia,” Mr Wong says.

Insurtech Gateway Australia CEO Simon O’Dell says he backed Koba after a third of Australian drivers surveyed during the design phase of the product said they would strongly consider switching to a per-kilometre offer.

Mr O’Dell says telematic motor insurance “got off to a rough start” in Australia and the UK, as insurer-centric solutions focused on “policing” driver behaviour – a Big Brother approach that “unsurprisingly” failed to win support from consumers.

“Koba is an exciting opportunity to bring a customer centric usage-based insurance solution to market in Australia,” he says.