The insurance industry's shift toward the future of auto insurance is well underway. But that doesn't mean there won't be some unexpected speed bumps—and surprise opportunities—along the way.
By now, it's clear that as vehicles become more connected, autonomous, shared, and electric (or
Today, personal transport is increasingly trending toward ride sharing, which is projected to be used by 2.3 billion people by 2029 and to top
The changes created by this mobility revolution will increasingly reshape consumers' relationships with their personal vehicles and redefine what they need and expect from insurers.
For carriers, the intersection of technological advances and market adoption represents an existential crossroads. According to a recent report from McKinsey, connected car technology could disrupt as much as
The unavoidable question becomes: What will fill this enormous revenue gap? McKinsey's report envisions these same CASE technologies opening up a new, $100 billion market propelled by embedded distribution, telematics-based pricing, and coverages for as-yet-unseen generations of autonomous vehicles (AVs) and electric vehicles (EVs). Meanwhile,
To remain competitive, carriers will need to innovate, particularly where the most exciting opportunities await: commercial lines. They'll also need to attain a new level of agility in an era when advances in—and market adoption of—CASE technologies don't necessarily progress at the same rate.
Implications
The shift to CASE technologies presents several critical challenges and opportunities for insurers:
- Shifting risk profiles: Autonomous vehicles and advanced driver-assistance systems (ADAS) are expected to reduce accident rates significantly. While this is a positive development for public safety, it also means declining premium volumes for insurers. Liability is shifting from individual drivers to manufacturers, software developers, and fleet operators, necessitating new approaches to underwriting and claims management.
- The continued rise of usage-based insurance (UBI): Shared and connected vehicles are paving the way for UBI models, where premiums are calculated based on actual usage and driving behavior. This shift allows insurers to offer more personalized and flexible products, aligning with changing consumer expectations.
- New data opportunities: Connected vehicles generate vast amounts of data that can be leveraged to enhance risk assessment, improve customer engagement, and streamline claims processes. However, this also raises concerns about
data privacy and cybersecurity, which insurers must address proactively. - Growth in commercial lines: The proliferation of shared mobility services and autonomous vehicle fleets is driving demand for commercial auto insurance. Insurers have an opportunity to capitalize on this growing market by developing tailored products for fleet operators and mobility-as-a-service (MaaS) providers.
We can expect these changes will also begin to increasingly shift the burden of liability from human drivers to commercial parties associated with autonomous vehicle technology—often original equipment manufacturers (OEMs) or software providers.
5 keys to mastering the future of mobility
To navigate the rapidly changing mobility landscape, carriers must take proactive steps to innovate and adapt. Here are five key strategies to consider:
- Invest in next-gen data and analytics: For insurers, the future of mobility hinges on leveraging real-time driving and traffic data from diverse sources. In addition to onboard systems and smartphone apps, carriers should integrate data from public and private transportation systems, IoT sensors, radar, Lidar, etc. This wealth of information can simplify claims processes and enable predictive, preventive insurance models.
- Adopt an intelligent insurance platform: Modern, cloud-based infrastructure is essential to handle exponential data growth.Insurers should be combining core, data, and digital capabilities with AI-driven orchestration to interpret complex datasets and streamline transactions across the insurance value chain.
- Forge strategic partnerships: Collaboration with OEMs, technology providers, and mobility startups can provide access to critical vehicle data and enable innovative insurance solutions. Staying informed about regulatory developments related to CASE technologies and engaging with policymakers is equally important.
- Develop CASE-centric product lines: Insurers must tailor their offerings to accommodate embedded distribution, usage-based coverage, and new risks associated with autonomous and electric vehicles. Leveraging AI to analyze claims and identify emerging risks can also uncover new product opportunities.
- Enhance customer experience: Applications that deliver personalized, seamless customer experiences across the insurance lifecycle are key to building loyalty and trust. Insurers can use telematics to provide proactive safety alerts and driving tips, transforming insurance from a reactive to a preventive service.
A connected future
As the mobility revolution accelerates, insurers must embrace change to stay relevant. The rewards for doing so are substantial. A robust ecosystem strategy, built on advanced data analytics and strategic partnerships, will enable carriers to pioneer new opportunities in commercial lines and beyond. By aligning with the broader goals of sustainability and customer-centricity, insurers can not only adapt to the mobility revolution but also thrive in it.
