In April 2019, Ford Motors created a new division representing multiple lines, including micro-mobility, non-emergency medical transport and city solutions. General Motors, a 110 year old company, rebranded as General Mobility offering services in real-time vehicle diagnostics, dealer notification and driver scoring to improve performance.
Emerging trends in automotive industry allude to a future of connected, autonomous, shared and electric mobility and are poised to alter the auto insurance industry as we know it. A fourth of motor premium is forecast to shift to these new domains in the next decade.
Recently, we saw Tesla announce plans to launch an insurance company. In Asia, ride-hailing giant Gojek and platform leader Grab have launched auto insurance. Traditional OEM manufacturers such as Toyota are actively building new mobility models and insurance plays.
What are the forces shaking up the mobility industry and in its wake, leaders in insurance?
New models to address transportation needs that include ride-hailing, car-share, car subscriptions, micro-mobility are growing, as a means to augment existing modes of transport.
Along with such mobility-as-a-service models, the advances in autonomous vehicle (AV) technology are envisaged to reduce individual ownership of vehicles, triggering a shift in coverages from personal to fleet and AV manufacturers. Concomitantly, mass market adoption of advanced driver assistance system and other AV tech is reshaping perception of risks. Additional risks such as covering for autonomous driving by cars or for charging cords are new opportunities.
The balance of personal to commercial premiums is forecast to shift and traditional premiums expected to fall due to higher road safety through AVs.
Till recently, automotive OEMs focused on selling, servicing and financing their vehicles. For selling insurance, they used referral route. But increasingly, like Tesla, OEMs are offering insurance to car owners. The motivation varies and in Tesla’s case, it seems to be a hedge against high premiums charged for its cars. Insurance is considered a barrier for many of Tesla’s innovations. By offering insurance, it will be easier to sell self-driving vehicles.
Tesla plans to use anonymized data collected by its fleet of vehicles and offer 20-30% discounts. The silver lining is that in every accident, Tesla has instant access to errant driver behavior data leading to risk reducing improvements in autopilot, stability control, anti-theft systems and bullet-resistant steel.
Toyota has formed a mobility company called Monet with Japanese automakers, testing self-driving systems. For the 2020 Olympics, it was ready to launch e-Palette self-driving shuttles to transport athletes. For its car owners, Toyota Insurance has teamed up with Nationwide to launch a telematics offering that promises up to 40 percent savings.
As automotive OEMs move into car insurance, repair costs will matter as much as original build costs. As car designs begin to assimilate medical and repair experience data, future cars can be built to minimize repair costs and increase safety, leading to lower customer premiums.
Mobility-as-a-service ride-hailing giant Gojek in Indonesia has launched an online insurance offering in partnership with an insurtech company for travel, motor vehicles and mobile device protection. For its 9+ million drivers, merchants and agents in a network spread across Southeast Asian markets, Grab had an impressive captive audience to promote its nascent insurance services and uses a partnership model to deliver digital insurance products to its drivers through the driver app.
The stakes are high. Private passenger auto insurance is a substantial part of P&C insurance market and offers considerable future economic value. The future of mobility is bound to stir change along the auto insurance value chain spurring demand for alternative insurance products and services. Insurers will be challenged to manage overwhelming data volumes and ecosystems centered on users will see them refine product offerings and bundle risk covers.
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