For many years, Europe’s population expansion and growing per capita income increased the number of automobiles bought, and miles traveled. However, mobility is at a crossroads. All mobility-related businesses, including the insurance industry, have transformed due to the battle against climate change. The car industry and motor insurers will need to alter their product offers and methods of operation as clients become more aware of emerging technology like autonomous driving and connectivity. Although these developments provide problems for the insurance sector, they also present new possibilities.
European politicians substantially increased their efforts to cut emissions from transportation in 2021. According to the European Commission, companies have pledged to reduce CO2 emissions from passenger cars by more than half by 2030, compared to 1990 levels, in compliance with the European Green Deal. Access limitations, such as limiting the use of private vehicles in some areas, have already been implemented in more than 150 European towns. Over the next ten years, the adoption of electric vehicles is predicted to reach nearly 50% worldwide. Modern tech will also aid in easing traffic congestion. For instance, the first Level 3 road congestion pilots may keep an eye on traffic bottlenecks and briefly convert the car to autonomous driving. By 2025 at the latest, Level 4 highway pilots that can keep an eye on traffic flow and travel at higher speeds should be authorized for private use. By then, it’s projected that linked “smart” automobiles would make up 70% of all new vehicles.
Additionally, places like Phoenix, San Francisco, and Seoul already have self-driving taxis on the road. By 2040, they are anticipated to make up around two-thirds of all travel kilometers in China. These kinds of cars should also be available on European roads in a few years.
Owning a car is still the primary requirement for personal transportation. However, the consumer market is now more receptive to innovative mobility alternatives. For example, between 2016 and 2021, the number of electronic journeys, or e-hailing, quadrupled, and the micro-mobility industry—which includes shared services, public transportation, and small electric vehicles—grew by 60%. As these trends continue, more individuals will choose other forms of transportation over owning a car.
How is it going to affect insurance?
The insurance industry will develop together with the mobility industry. For instance, it’s expected that claims will become less common during the next several years. The high expense of replacing components, such as sensors in car bodywork or battery in electric vehicles, will also make claims more substantial when accidents do occur. More significantly, as fleet enterprises and micro-mobility expand, the popularity of privately owned automobiles will decline, considerably reducing the major business category for most vehicle insurers.
Insurance firms will need to adopt new strategies to address the projected fall in auto insurance premiums and make up for this loss with new business models. If liability is moved from the user to the producer strategy that some elected elites are discussing—auto insurance companies will also need to adjust to a changed risk profile. To adapt, insurers must create new competencies in product development, actuarial, sales, and customer support. The insurance sector has to prepare for substantial changes in business priorities as soon as possible.
Starting point
Thankfully, such a transition presents chances that agile suppliers may seize. Expert predictions state that by 2030, the global mobility insurance market might generate $30 to $50 billion from only vehicle connections. That sum would be more significant than 10% of current premiums. Here are four new data-driven strategies that businesses may employ to exploit mobility shifts fully:
Price based on behavior:Pay as you drive or premiums dependent on driving habits provide policyholders appealing options to save money. If more offers are made using movement and vehicle data, this strategy may prove successful in the long run.
Modern ecosystem options:Automobile manufacturers play a more significant role as partners as direct sales of autos increase. However, given the continued trend of interwoven offers—buying a car and insurance from the same place—they should also be seen as prospective rivals. Therefore, insurance companies should work to establish alliances that are mutually beneficial inside their ecosystem. For instance, they may use a seamless digital procedure to include a streamlined insurance provision in the purchasing and selling vehicles.
Products of multimodal insurance:The increase in mobility diversity may be addressed by providers by offering the right insurance products. For instance, they may provide a single product category for anything from personal vehicles to rented e-scooters to holiday rental vehicles. This solution gives the company’s insurance services access to new client segments that may not have had that opportunity before.
On-demand services:39% of all purchasers desire to activate more digital services after buying a car. 50% of owners of high-end brand automobiles choose to use these extra services. At the touch of a button, insurers may capitalize on the substantial demand by offering additional services, such as foreign insurance, insurance for passengers, or active driving coaching.
Insurers should prepare to seize new business possibilities in the longer term by expanding into other sectors of the mobility ecosystem by utilizing the knowledge and information they have gathered through mobility insurance products. There are various choices, including fleet management, secondhand car sales, the electric vehicle charging industry, and auto repair shops. Additionally, greater variety has advantages over aggregators, who usually gain from uniformity.
Motor insurers must have the fortitude and imagination to go forward, as is frequently the case throughout change management. Responding to the transportation transition will result in more substantial companies for those that tackle problems early. Additionally, they will be crucial in defining the new era of mobility.
