{"id":60702,"date":"2020-07-09T10:23:25","date_gmt":"2020-07-09T14:23:25","guid":{"rendered":"https:\/\/staging.majesco.com\/?p=60702"},"modified":"2023-01-19T11:55:58","modified_gmt":"2023-01-19T16:55:58","slug":"arriving-at-tomorrowland-are-auto-insurers-preparing-for-mobility-ecosystems","status":"publish","type":"post","link":"https:\/\/staging.majesco.com\/?p=60702","title":{"rendered":"Arriving at Tomorrowland: Are Auto Insurers Preparing for Mobility Ecosystems?"},"content":{"rendered":"

There has almost never been a time when we haven\u2019t asked, \u201cWhat is the fastest and easiest way to get from here to there?\u201d In the 1950\u2019s and 60\u2019s, when Walt Disney envisioned the various rides at Disneyland, one of his primary themes was, \u201cHow will people move in the future?\u201d Tomorrowland was filled with the answers. There was a ride emulating interstate travel, a \u201cPeople mover,\u201d which was a moving walkway integrated into an emission-free tram with small, individual cars. Space Mountain depicted a time when anyone could travel in space. And to get to the heart of the park, you boarded a monorail \u2014\u00a0a smoother, cleaner and more modern ride than a bus or a commuter train.<\/p>\n

By any estimation, we\u2019ve arrived (and we\u2019re passing) Tomorrowland. Though people have been limiting their movement this year, it hasn\u2019t stopped the momentum of the technologies that move us. In 2020 alone, we\u2019ve seen SpaceX and Boeing take additional steps in the race to become NASA\u2019s space taxi. We\u2019ve watched the recent development of flying taxis, hyperloops, high speed rail and autonomous vehicles \u2013 both cars and trucks. We have also seen the rise of simpler and smaller transportation networks that include electric bikes and app-driven electric scooters.\u00a0 And we have seen the expansion of ridesharing to food delivery and more.<\/p>\n

The reality is, no single transportation method\/vehicle is going to offer up the best transportation experience for all our changing needs. The future of transportation is multi-modal. For many people today and in the future, multiple methods of transportation will be involved in the same commute. Just as bus to metro rail or ferry transfers have always been an option, today\u2019s longer commutes may involve an Uber to metro to walking to scooter. These solutions will increasingly be faster as congested cities grow.<\/p>\n

Mobility is the wave of transportation.<\/p>\n

What does this mean for auto insurance? For the last month, we have been grappling with the impact and opportunities of Mobility ecosystems upon auto insurers. In June, Majesco published its latest thought leadership report, Rethinking Auto Insurance: From a 120-Year-Old Policy Transaction to a Next-Gen Mobility Customer Experience<\/a>. In the report, we take a look at not only the trends that are going to be driving auto insurers over the next few decades, but we also look at the ways in which insurers need begin to think outside the vehicle to cover and facilitate the complete journey.<\/p>\n

In today\u2019s blog we ask two specific questions.<\/p>\n

How large is the potential impact? What changes should insurers make to sustain their relevance as mobility shifts?<\/strong><\/p>\n

Envisioning the Impact of Tomorrow\u2019s Mobility Environment<\/h2>\n

The nice thing about the future is that the new Walt Disney\u2019s of the world are thinking it up right now. This is certainly the case for the MaaS Alliance, a \u201cpublic-private partnership to create a common foundation for mobility-as-a-service (MaaS) to integrate various forms of public transportation into a single mobility service, accessible on demand.\u201d[i]<\/a><\/p>\n

Travel to Europe and you\u2019ll understand why. A \u201csimple\u201d trip from London to Berlin, might involve a cab, metro passes, individual light rail tickets, flight passes, car rentals and international credentials \u2014\u00a0all in the span of one morning. MaaS has envisioned a better way. \u201cTo meet a customer\u2019s request, a MaaS operator facilitates a diverse menu of transport options, be they public transport, ride-, car- or bike-sharing, taxi, car rental or lease, or a combination thereof.\u201d<\/em>\u00a0<\/em><\/p>\n

This all sounds wonderful, unless you are an auto insurer in Europe. MaaS has the added fuel of European regulation to assist it with its vision.<\/p>\n

The goal of the regulation is very \u201cMaaSive\u201d: it aims at improving awareness of alternatives to the use of private owned cars for mobility and increased use of ground transport as an alternative to short and medium airline routes even across borders.\u201d[ii]<\/strong><\/a><\/em><\/p>\n

It doesn\u2019t take much to see how this is going to impact the world of auto insurance, which is already changing across many dimensions due to the shift in how other companies are adapting to a new world of mobility and using new technologies to change and influence the customer experience<\/p>\n

Auto insurance is a significant part of the P&C revenue stream, both personal and commercial.\u00a0 According to the NAIC, private passenger auto liability (23.3% of total NPW) and private passenger auto physical damage (15.5% of total NPW) represented 38.8% of the total NPW for US insurers in 2018.[iii]<\/a>\u00a0 When you add commercial to this it reflects the financial importance of auto for P&C insurers.<\/p>\n

But with all the change in automobiles, a decline in car sales (as reported by the III \u2013 see Figure 1[iv]<\/a>), and a new view on mobility by the younger generation, the future of auto insurance premiums will likely decline and coverages will shift.\u00a0 Changing views of ownership of a vehicle versus considering other mobility options will accelerate due to the cost of owning and driving a personal vehicle.<\/p>\n

To put it in perspective, the AAA\u2019s 2019\u00a0\u201cYour Driving Costs\u201d\u00a0study found that the average cost to own and operate a 2019 model vehicle was $9,282 in 2019,[v]<\/a> an amount that can buy a lot of other mobility options that are of higher interest to the younger generation. As such, insurers must \u201cthink fast\u201d to maintain customer relationships and define new revenue opportunities via value added services around mobility in this fast-changing environment.<\/p>\n

Figure 1: New vehicle sales trends<\/em><\/p>\n

\"\"<\/p>\n

A report by Deloitte did a deeper dive into the impact of the evolving transportation ecosystem and the impact on future premium revenue for insurers.\u00a0 They defined the future states of mobility based on vehicle technology and vehicle ownership or non-ownership. The four states they identified included:<\/p>\n

    \n
  1. Incremental change<\/li>\n
  2. The world of carsharing<\/li>\n
  3. The driverless revolution<\/li>\n
  4. A new age of accessible autonomy<\/li>\n<\/ol>\n

    This view aligns substantially with responses from our research outlined in the Rethinking Auto Insurance report<\/a>, further validating the significant market shift for auto insurance.[vi]<\/a><\/p>\n

    Based on this model, Deloitte did a deeper actuarial analysis of the impact to premiums for the years 2030 and 2040, reflected graphically in Figure 2.\u00a0 They defined a \u201csteady state\u201d scenario that assumes the current mobility environment persists \u2013 where there are no further advances in driver-assist technologies, autonomous vehicles do not become part of the national fleet, and ridesharing does not continue to expand \u2013 adjusted to account for population growth and inflation. Here is what the future potentially looks like:<\/p>\n