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What 2022 brings for vehicle insurance?
#insurance #insurtech #mobility
January 12, 2022
Insurance, 2022, trends, outlook,
open mobility, insurtech
New insurance approaches for new mobility services: on-demand, pay as/how you use, and embedded.
Shared mobility includes ride-hailing, car- and bike-sharing. In 2021, the global shared mobility market size was estimated at 251 billion U.S. dollars, which was forecasted to surpass 1.18 trillion by 2028. McKinsey provides extensive analytics on where the mobility market heads.

All these services are digital and offer new driving and mobility experience, making it affordable, flexible, and usage-based. The same goes for pricing and related services, including insurance.

I'm saying that insurance companies will have to change their good old business models and come up with on-demand insurance, usage- and behavior-based models, and insurance for new mobility types. Moreover, insurance should be embedded into new mobility services and become their integral part.
One of the global trends one can’t reject is how people change their attitude to ownership. I mean the shift from owning to using things and choosing services instead of goods.

“We don’t want to buy and own things – we use them when we need them.”

Such a change in our attitude touched upon vehicles and gave birth to a range of new services like ride-sharing, carsharing, micro-mobility, on-demand mobility. The numbers speak for themselves.
Going for B2B and B2B2C
Historically, commercial vehicle insurance has always been underserved, but for a reason. B2B occupied 5-10% of the market, the mileage was huge, and the combined ratio was rarely below 100%. Doesn’t look like a piece of cake, right?

But these times are going west much faster than we could imagine.

British scientists predict that commercial vehicles, occupying 10% of the market today, will claim a 60% market share by 2040. Sounds unbelievable, but these numbers may even be pessimistic. And this is why.

Urbanization draws people into cities lightning fast.

As a result, these people:

✅ Trade their private cars for public or shared transport and micro-mobility.
✅ Exist in a new transportation environment, where they don't take responsibility and own vehicles.
✅ Drastically change their attitude to goods transportation and delivery with the new delivery and last-mile services boosted by COVID-19.

At the same time, accelerated private-hire models globally require tailored insurance for their needs.

Driven by all this, the B2B and B2B2C sector is expanding fast. And insurance companies need to take prompt actions to cope with this pace, introducing tailored programs.
Telematics is on the agenda again, and this time it’s for real:).
For the past 20 years, people have been naming telematics a step towards innovation in vehicle insurance, but nobody has taken this step so far. The reason was simple:

“Insurers didn't need this data to operate their highly profitable business models.”

But the new mobility services changed the game with their high demand for digital insurance. As telematics was the only way to satisfy the demand, it turned from a "nice-to-have" into the "MUST-HAVE" technology.
What's more, telematics has already proven its efficiency in B2C motor insurance by Progressive, Allstate's Arity, Liberty Mutual, and many others. For example, 20% of Allstate customers have telematics, and this number is growing fast.

Now the time has come to use telematics in B2B/B2B2C.

And dozens of early-stage initiatives around the world prove our assertion.

The good news is that fleet management companies have had 20 years to master telematics in B2B. And they did a great job equipping millions of cars with data collection devices and developing tons of different solutions on top of it. They've done half of the work.

Now, insurers need to learn how to implement existing telematics data and solutions for risk assessment. And the key directions will be:

Harmonization and normalization of telematics and IoT data from various data sources;
✅ Driver performance monitoring, distraction detection, and driving style improvement based on various factors;
✅ ADAS utilization;
✅ Dashcam information and events analysis;
✅ Smart geofencing and environment factors analysis;
✅ Vehicle health monitoring.

To sum it up, with digital mobility products, new market segments, and services, insurance strives for automotive data to survive. It’s not a question if telematics should be here anymore, but rather the fundamental truth.
Cyber Security
The increasing volumes of data and its diversity make it less controllable and secure.

Modern vehicles turn into devices on wheels generating enormous amounts of data. Today, a car can generate from 1.4 to 15 TB/hour, and these amounts grow exponentially.

The more data the vehicles create, the more data security issues arise. As the core vehicle control systems are digital, cyber security is no more a question of privacy but an integral part of automotive safety, similar to seat belts or airbags.

To manage this, the private sector, insurers, and governments encourage a collaborative approach and join forces to bring a more secure driving experience.
Autonomous vehicles
You may think we placed autonomous vehicles here because it’s the most popular topic in the automotive world, but it’s not that straightforward.

People make autonomous cars to avoid dangerous situations and eliminate human errors on the road. We rely on technology that understands the situation on the road faster, predicts and prevents danger. In other words, the risk liability shifts from drivers to autonomous vehicles, but vehicles can not be liable here. Logically, the risk shifts to car manufacturers, Tier1s, software providers, and involved parties.

And this is the challenge insurance companies should address (together with other mobility players involved) and figure out the proper solution, becoming the orchestrator of the growing autonomous mobility.
To sum it up
✅ Usership over ownership, and personalization over legacy.
✅ New mobility requires a new level of insurance.
✅ First, try it with B2C and then scale it for B2B.
✅ David becomes Goliath faster than you think.
✅ Telematics is here, and this time it is serious.
✅ Cyber security is not only about data safety, it’s now about the safety of a human or pet on the road.
✅ Self-driving cars are good to drive autonomously, but are they taking risks?

That’s what the previous year revealed to us. In 2022, we’ll keep you updated on everything that changes the insurance industry. Follow us not to miss a detail!
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