The insurance industry has hit a tipping point and insurers have a decision to make. Do they completely overhaul their current business models to adapt to the changing lifestyle and demands of consumers or stick to methods they know best at the risk of losing out to their competitors? The gears are shifting for insurers and they need to decide if they want to hit the pedal to the metal.
New data from the World Property and Casualty Insurance Report by Capgemini finds 42% of policyholders want a single policy that covers them irrespective of their mode of transportation, whether they are driving a car or using a ride-sharing service. This is all occurring against the backdrop of autonomous vehicles rising in popularity and changing the nature of risk in the automotive sector as they bring hacking of self-driving cars into the equation. To top it all off, original equipment manufacturers (OEMs) and major automotive brands aim to embed insurance coverage in vehicles they plan to sell in the future through subscriptions, creating an increased risk of disintermediation.
While consumers are not yet willing to replace their personal vehicles in the short-term, there is an increased desire towards adding new mobility options. Capgemini research shows adoption of micro-mobility, shared vehicles, and multi-modal transportation solutions amongst urban customers will double from 29% today to 58% in 2025. Although it is not crystal clear exactly where insurers fit in this picture one thing for certain is that opportunity resides here. This changing customer behaviour is expected to drive premiums for autonomous, connected, electric and shared vehicles to grow eightfold to US$570bn by 2030.
The new era of mobility is progressing rapidly and with this, insurers need to be prepared to think strategically, action quickly and begin now
The tides are turning for the mobility industry, and senior insurance executives need to ensure their businesses are disrupting, rather than being disrupted. And quickly. While it is important for insurers to remain strategic—after all, the decisions they make in the coming months will impact them for the next decade—they must also act swiftly. The first movers have already left the starting line and partnerships are being cemented.
So, what exactly are the steps insurers need to be taking? It comes down to focusing on three key actions: having a solid technology foundation, capability to generate powerful customer insights, and identifying and developing the right ecosystem partnerships to create value at scale.
Bolstering technology capabilities
In light of this mobility revolution, two in three insurers (67%) believe a well-defined technology roadmap is critical for success. While the sentiment is there, regrettably, 63% of insurers are concerned about the adequacy of their technology capabilities and 45% about evolving customer expectations. All signs pointing to one direction for business success. Players need to invest in scalable technology, tools and capabilities that deliver a seamless and secure data sharing and ecosystem participation. Crucially, this needs to move beyond just sharing static customer information and involve continuous data streams that can be analysed for real-time pricing and risk assessment.
Legacy systems is one major barrier insurers could find themselves against, especially, when trying to engage with the most desirable ecosystem partners. While alliances with InsurTechs can support insurers in overcoming constraints, the bottom line is that central platforms at most insurers must be modernised. Dynamic underwriting and product personalisation will become key capabilities to prioritise across their technology stack, both of which require advanced toolsets and more flexible infrastructure.
Knowing and offering what customers want
Since insurance products are going to evolve significantly in the coming months and years, another action for insurers to focus on is grasping what customers want. Consumers purchasing mobility subscriptions from a dealer or OEMs will require insurers to be able to design policies that can flex for various types of situations and vehicles. After all, usage-based insurance is expected to become increasingly prominent. In addition, consumers using more modes of transport will want integrated coverage not only for primary vehicles but also e-scooters, e-bikes and ride-sharing purposes.
By understanding specific customer preferences and needs, insurers can also determine what business they want to be in. For example, some may want to pursue owning the product and pricing, leaving the customer-facing responsibilities to partners. This white-label approach may not be the best tactics for household name brands. However, for other insurers there will be advantages to be had by exclusively focusing on product development and outsourcing the customer experience work to other partners.
On the other side, for insurers wishing to handle customer relationships directly or make themselves the most appealing partners, they need to find alternative methods to stand out and excel. With 68% of consumers making renewal decisions based on their experience at the ‘claims’ point, it is clear this remains the ‘moment of truth’ for many customers. A personalised, easy-to-use and hassle-free experience from purchase through to delivering the policyholder a speedy and frictionless payout becomes even more essential.
Expanding the partner ecosystem
The third step insurance leaders need to ensure they are taking as they enter this new era of mobility is bolstering their partnership ecosystem. Not many will be venturing alone as they navigate through the changing world of mobility and having the right partners on their side will be vital. By successfully monitoring the rapid evolution of the market, including the adoption of new modes of mobility, insurers can better evaluate potential partnerships.
Senior insurance executives need to ensure their businesses are disrupting, rather than being disrupted
Current trends all indicate there will be more extensive partnerships to underpin product innovation and fulfil customer experiences. As part of this, many will seek to create ecosystems that involve both other service providers and insurers. For example, global insurer Allianz partnered with San Francisco-based company Lime, a major international micro-mobility player, to improve rider safety by offering educational resources on safety and fully embedded no-cost personal accident and liability insurance. However, as only 21% of insurers have advanced partnership capabilities, there is still work to be done in the area.
Once insurers have their ducks in a row when it comes to implementing new tech, customer research and creating market monitoring capabilities, they can begin designing future products and piloting them. Product management and innovation teams can look to lead the charge in this area, but, where possible, insurers should look for partners in co-creation.
With the incoming mobility revolution set to bring disruptive and complex implications, it’s difficult for insurers to opt for the correct approach—even if they have prior knowledge of what big changes maybe be coming. However, what is certain is that the new era of mobility is progressing rapidly and with this, insurers need to be prepared to think strategically, action quickly and begin now.
About the author: Kiran Boosam is Vice President and Head of Global Insurance Strategy & Portfolio at Capgemini