How Insurance Companies Will Face The Future Of Mobility

“Welcome to the world of insurance in the year 2030, as seen through the eyes of Scott, a consumer. His computerized personal assistant requests a self-driving vehicle for a meeting across town. Scott decides to drive today after climbing into the incoming automobile and switching the car into “active” mode. Scott’s assistant sketches out a prospective route and communicates it with his mobility insurance, who replies quickly with an alternate route with a considerably reduced probability of accidents and car damage, as well as the calculated adjustment to his monthly rate.”

For generations, increased per capita incomes and population expansion in Europe were followed by increased the number of automobiles purchased and kilometers traveled. Finally, however, mobility has reached a tipping point. Climate change has altered all mobility-related businesses, including the insurance industry. And as customers become more aware of emerging technologies like autonomous vehicles and connectivity, the car industry and motor companies will need to adapt their product offers and business models. These developments provide new problems for the insurance sector and present new possibilities.

Overcoming the bottleneck

European politicians considerably increased their efforts to minimize transportation emissions in 2021. According to the European Commission, corporations have pledged to decrease CO2 emissions from passenger automobiles by even more than half by 2030, compared to 1990 levels, under the European Green Deal. And over 150 European towns have already implemented access limitations, such as limiting private car use in defined zones, and worldwide adoption of electric vehicles is estimated to reach over 50% within the next decade.

Modern tech will also assist in improving traffic flow. For example, the first Level 3 road infrastructure pilots may monitor traffic delays and briefly convert the car to autonomous driving. Level 4 freeway pilots, which can monitor traffic and drive independently at more incredible speeds, are projected to be licensed for use in private vehicles by at least 2025. By that time, it is expected that 70% of all new automobiles would be networked “smart” vehicles. Furthermore, self-driving taxis may already be found on the streets of places such as Phoenix, San Francisco, and Seoul. They are expected to account for around two-thirds of all passenger kilometers in China by 2040. Europe will likely have these automobiles on the roads in a few years.

Personal mobility is still predominantly defined by the possession of an automobile. However, the consumer sector is becoming increasingly receptive to novel mobility alternatives. For example, e-hailing journeys tripled from 2016 to 2021, while the micro-mobility industry (small electric cars, public transportation, and shared services) expanded by 60% in 2021 alone. As these trends continue, more individuals will abandon automobile ownership in favor of alternate modes of mobility.

Effect on the Insurance Industry

The insurance industry will change in tandem with the transportation sector. For example, the number of claims is expected to fall dramatically in the following years. At the same time, claims will become more significant when accidents occur due to the high cost of part replacements, including such sensors in car bodywork or batteries in electric cars. More radically, as fleet enterprises and micro-mobility develop, personally owned automobiles will become less popular, thus reducing the major business category for most motor insurance.

Insurance firms will need to create new techniques to combat the projected fall in auto insurance rates and account for this loss. Motor insurers will also have to adjust to a unique risk profile if liability is moved from the driver to the manufacturer, as some political leaders are considering. To adapt, insurers must develop new skills in product development and actuarial, selling, and customer support departments. The insurance sector must prepare for substantial adjustments in business goals across the board, and the sooner, the better.

How to get it to go?

Thankfully, such a shift creates an opportunity for quick-thinking suppliers. Experts believe that car connections alone might generate $30 billion to $50 billion for the global expansion of the insurance sector by 2030. That sum would be more than 10% of current premiums.

On this are illustrative examples of innovative data-driven ways that businesses may employ to capitalize on mobility shifts:

Behavior-based on Price: Premiums depending on driving style (“pay how you drive”) or vehicle use (“pay as you drive”) provide policyholders with appealing savings options. If movement and vehicle data are utilized to make more offers, this strategy may pay off in the long run.

New ecological services: Car manufacturers are becoming increasingly significant as partners as direct sales of motor vehicles increase. However, when integrated offers—purchasing a car and insurance from a single source—continue to develop, they should be regarded as prospective rivals. Insurers should aim to form relationships that benefit both parties inside their ecosystem. They might, for example, use a seamless digital procedure to combine a streamlined insurance provision into car purchasing and selling.

Multifunctional insurance products: Insurance providers can respond to an increase in mobility variety by offering relevant insurance solutions. For example, they may provide a single product category, from private automobiles to loaned e-scooters to holiday rental cars. This solution gives new client groups access to the firm and its insurance services, which they may not have previously known.

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li>Services available on demand: 39 percent of all purchasers desire to activate extra digital services after purchasing a vehicle. 50% of owners of premium brand automobiles choose these different services. Insurers may capitalize on this high demand by providing additional services, such as foreign insurance, passenger insurance, or active driving coaching, available at the touch of a button.

Within the near term, insurers may prepare to seize new business possibilities by leveraging the insights and data gleaned from mobility insurance solutions to expand into other parts of the mobility ecosystem. Among the numerous alternatives are fleet management, buying and selling secondhand automobiles, the electric car charging market, and car servicing. More diversity also gives you an advantage against aggregators, who profit from uniformity.

Motor insurers will need guts and innovation to go ahead, as is typically the case throughout change management. Responding to the transportation transition will strengthen companies that address difficulties early on. Furthermore, they will be crucial in creating a new era of mobility.