Auto insurance landscape is shifting quickly. Consumers may forgo buying cars altogether in favor of renting luxurious autonomous rides from companies like Jaguar and Porsche.
Conventional US auto insurance market could reach its peak by 2030 and then decline, creating both challenges and opportunities for insurance carriers.
Telematics
Auto insurance is currently experiencing profound change, and leading insurers must use automation and empathy to achieve outcomes such as driving revenues and policies in force, optimizing expenses, and effectively managing risk.
Telematics will revolutionize how auto insurance policies are sold, underwritten and priced with its introduction. A new generation of mobile-first telematics gadgets can monitor how you drive while providing reliable loss-correlated data to insurers for underwriting purposes – thus eliminating aftermarket devices or data entry processes altogether.
Insider Intelligence reports that 79% of consumers report an interest in purchasing car-insurance bundled together when buying their vehicle, and up to 30% of personal auto premiums could come directly from embedded insurance offers by 2020.
Direct-to-Consumer
Auto insurance’s landscape is ever-evolving, driven by shifting social norms and technological innovations as well as fluctuating consumer preferences. Staying abreast of key industry trends will enable you to position yourself favorably within the marketplace and stay one step ahead of competition.
As vehicle safety technologies advance, vehicle manufacturers will be able to incorporate some form of auto insurance directly into the design. This presents insurers with an opportunity to market a unique form of coverage which comes bundled with each car – eliminating many of the traditional sales, marketing, underwriting and servicing challenges associated with traditional policies.
Many consumers are opting for usage-based insurance (UBI), which offers drivers tailored policies based on their driving habits and behaviors. This will impact the auto insurance industry by speeding product innovation and shifting underwriting/pricing away from self-reported, loss-correlated data towards independently observed behavior/performance data that makes underwriting and pricing more efficient as well as providing more personalized products.
Electric & Autonomous Vehicles
The introduction of electric and autonomous vehicles (EVs and AVs) will transform the auto insurance market. Autonomous vehicles will greatly decrease collisions, traffic congestion, emissions, and mobility issues while simultaneously decreasing bodily injury claims costs and premiums.
Autonomous cars also boast superior ability to interpret local regulations and scan their environment more quickly, meaning they’re far less likely to break traffic laws, further decreasing liability claims against insurers.
Self-driving cars can be more expensive to repair and replace than their ICE counterparts, increasing repair and replacement costs and premiums accordingly. Furthermore, technological errors within autonomous cars could result in product liability claims outside the coverage scope of personal auto policies; as a result, this new risk requires different coverage and risk assessment models; some OEMs might decide to offer insurance directly to consumers which could alter how profit pools work as well as who owns and manages risk within the market.
OEM Partnerships
Insurance carriers who partner with OEMs can enjoy an easier business model. OEM captives may offer “white label” products directly to customers while collecting commissions; this approach has gained in popularity among auto buyers as it provides clear value propositions that compete against price comparison websites.
Partners provide insurers with more efficient distribution channels, accessing telematics data and insights that would otherwise be hard to collect on the open market. In addition, manufacturer vehicle expertise combined with app-based customer experience platforms offer additional services which increase policy value while providing them an edge over traditional competitors.
However, for this partnership to yield maximum benefit, insurers will need to make sure they possess the appropriate technology systems and capabilities in place for analyzing large volumes of telematics data on an ongoing basis – otherwise their offerings could simply mirror those found on the open market.