Human-linked vibrations in the Earth dropped by 50% on average due to COVID-19. Globally, interest in new cars is high however 51% of those surveyed intend to travel less. Use of shared transport (especially micromobility) is now above pre-pandemic levels. What is driving changes in mobility? Take a front seat as we kick around a few thoughts on impacts for insurance.
The automotive industry continues to make progress in manufacturing fully autonomous vehicles (AVs). However, AVs for the mass population are still some time away. Current consumer and business interest is for electric vehicles (EVs). A range of factors are at play here leading to demand for EVs. These include increased awareness of environmental concerns as well as the reduced cost of EVs compared to just a few years ago, government incentives in some jurisdictions and wider availability of EV charging infrastructure.
However, cars are just one part of the equation as consumers adopt a multi-modal transport experience post lockdown. Cycling and walking have increased during COVID-19. In some countries, shared bikes are regaining popularity following relaxation of COVID-19 lockdown restrictions. The following graphic from the Marsh Mobility as a Service report sums up mobility offerings nicely:
Mobility as a Service (MaaS)
Mobility as a Service refers to a service which integrates multi-modal transportation options into one service offering to the consumer. For example, to get to work, a person might take a train ride followed by a share scooter or rideshare from the station to the office. The train and scooter/rideshare booking/fare could be integrated into one service offering, such as through an app.
An MaaS trial was conducted in Sydney from November 2019 to March 2020. The trial found that an effective and enticing MaaS offering needs to do be more than an app with an integrated PAYG offfering. Furthermore, although the trial was short and behavioural change could not be measured, the findings suggest MaaS has the potential to decrease car ownership.
The researchers believe that MaaS is currently in the ‘trough of disillusionment’ phase of the Gartner hype cycle. In other words, it is time for MaaS providers to improve their service offerings to satisfy the early adopters.
Connected car insurance
While AVs were once heralded as the impending major disruptor to traditional car insurance, the insurance marketplace is already changing even without the widespread rollout of AVs. Connected cars are now giving car manufacturers access to more data than ever before and unlocking entirely new business models. One such example is that the data collected could potentially be monetised, creating significant opportunities for car manufacturers.
The below graphic shows how connected cars are changing the automotive industry. An industry once focused on manufacturing and selling cars is now increasingly shaped by the critical services surrounding it.
These additional business partners provide additional revenue streams for car manufacturers and opportunities for new, smaller players to enter what was once an industry with high barriers to entry.
The ability for car manufacturers to be constantly connected to the driver is also driving change in insurance offerings. The customer experience no longer ends once the customer drives away from the dealership. The ability for car manufacturers to know how their cars are being driven is creating a data set which insurers are trying to gain access to. So much that some car manufacturers have decided to develop an insurance offering themselves.
Tesla’s insurance offering is one such example. While the offering is usage based, data about driving behaviour is analysed at an anonymised aggregate level. On its website, Tesla states that its insurance offering ‘uniquely understands its vehicles, technology, safety, and repair costs, and eliminates fees taken by traditional insurance carriers’. In some countries, such as Australia, Tesla works with a local authorised insurer to provide Tesla insurance.
As more car manufacturers develop connected cars, we might expect to see more of these ‘Tesla style’ insurance offerings. Traditional insurance companies offering car insurance may see more business in B2B2C insurance business (through car manufacturers) rather than through D2C models.
In tandem, connected car technology is also being ‘retrofitted’ into cars. The use of OBD-II devices can turn almost any car into a connected car. As can be seen, a whole suite of technology is required to bring such an offering to life.
The rise of micromobility and other on-demand transport offerings also creates insurance risks for service providers. Large fleets of e-bikes, for example, may need to be insured against damage and liability. Depending on the jurisdiction, it may be necessary or desirable to cover those involved in ride-sharing for for injury while at work (eg. gig economy workers). The infrastructure to support micromobility may also need protection; things such as bike racks or scooter chargers.
While a person might insure their car against damage by third parties, a person using a share bike will not need to insure the bike. However they might need to insure themselves for liability if they accidentally damage the bike when riding it or if they damage other people’s property or cause injury during the ride. MaaS therefore signals a shift away from an ‘ownership’ mindset to a ‘service’ mindset. The insurance risks are different.
The bundling of multi-modal transport options into one service offering also calls for the need to bundle multi-modal liability into one insurance offering. We are already seeing parts of this happen in the marketplace, albeit it is still very fragmented. For example, instead of buying travel insurance to protect against loss or theft of personal items while on a trip (eg. expensive camera), insurance is increasingly placed just on the camera itself, for protection wherever in the world. MaaS may therefore create demand for insurance solutions which provide protection for loss, damage and liability that could occur across all modes of transport used in a trip.
The service providers of MaaS also need bespoke coverage for their unique liability. Take a rideshare driver for example, is that person covered under their personal car insurance when they are driving customers from A to B for 3 hours on a Saturday? What about the situation when they are driving around looking for work?
The road ahead
As the way we move change, car insurance is not going to be the only cover we need when we go from A to B. As a result, we are seeing a multi-faceted change in insurance for mobility. Car insurance is not facing extinction but it is certainly being forced to evolve. To sum up:
- car manufacturers have new business models which may include insurance, whether it be on their own or with a local partner;
- connected car insurance opportunities are increasing;
- insurers offering car insurance may see more B2B2C opportunities compared to D2C;
- micromobility is creating new opportunities for transport but also new risks to insure;
- on-demand drivers may need to be covered for injury while at work; and
- ‘mobility as a service’ may drive demand for multi-modal insurance offerings for consumers.
These are just some factors driving change to the insurance marketplace for transport services.
Tim Chan is an insurance & insurtech lawyer at global law firm Norton Rose Fulbright and Founder of The InsurTech Lawyer blog. He regularly advises insurers and startups on emerging legal issues affecting the industry. Follow Tim on Twitter: @timinsydney