The future of Auto insurance

The boom of technologies and the increasing trend of industries of taking advantage of them have delivered a more than evident evolution in the Auto sector. According to studies and projections developed by automakers, as by the insurers that intervene in this activity, it can be seen a clear change in the behavior of clients and potential insuredes.

On the one hand, there are some factors such as the The EU and international air pollution policy, which have conditioned the commercialization of certain types of vehicles, provoking uncertainty among potential clients. These are starting to put into question the investment of buying a vehicle and the type of fuel that it uses, understanding that a bad choice could lead to a short useful life of it or even suffer transit restrictions as they are foreseen to be applied in big cities.

And on the other hand, it can be observed that mobility itself is changing in big cities, in which it is shown the bloom of new renting services such as scooters, bicycles, motorcycles and automobiles. Summed to these emergent modalities are others more consolidated as the Taxis and Ride-hailing firms like Uber or Lyft. These new modalities, as well, have the benefit of being based on pay-per-use options, which compared to the property of a vehicle can generate significant savings for consumers.

All this has turned the alerts on for the majority of the automotive brands, as well as their financial subsidiaries and other agents of the ecosystem as banks, insurers, car rentals, fleet managers, among others. They all share the same objective: to get a greater engagement and build customer loyalty despite mobility moving increasingly forward and easy, flexible and individualized future.

 New trends: Where is automotive moving towards?

The current situation of the Auto industry is moving towards the development of new products and services that respond to the direct necessities of the client. This latter has evolved and now, thanks to the different sources of information with which it counts, can have a more critical vision of the products that he consumes or pretends to acquire. The industry, consequently, must prepare itself to deliver solutions to this new type of clients, who are more prepared, oriented to immediate use. They are many the innovations that these agents are carrying out, but the trends that they are most strongly betting for could be highlighted within the following five:

·        Electric vehicles, which will allow in the long term a free-of-emissions mobility and at the same time will count with the possibility of using renewable energetic resources.

·        The increasingly successful and efficient model of carcashing, which focalizes its next steps towards evolution, proposing the incorporation of new autonomous vehicles. With this evolution, it will no longer be necessary for the user to move in the search of the nearest vehicle, but it will be possible to request it on-demand and for it to come to the concrete place and time where requested by the client.

·        The reduction of the renewal cycles of vehicles. This one is one of the most important trends in the Auto sector, as the vehicle renewal cycles will be reduced, going from the current five to eight years to the total or partial substitution of it once reached the first year, in order to integrate the latest novelties in its components and intelligent systems. The circular economy where the vehicle will go once again into the production chain for its reutilization will be one of the biggest leverages for this continuous renewal.

·        Connected vehicles, which allow the connection with other cars, with the transportation infrastructures, with the individuals who occupy them and with the exterior, guaranteeing countless benefits in transit and vial safety.

·        The utopia of the autonomous vehicle, that which does not require human intervention for its use, is closer than ever thanks to the progress achieved in areas artificial intelligence, automatic learning and neural networks.

A new opportunity for insurers

Insurers, on their side, have noticed that there has been produced a change in interpretation that leads to auto property. Based on this, it can be said that, if the property of a vehicle stops being of one individual, the obligation of having insurance starts being of a collective owner. Therefore, it is required, evidently, a shift in the relationship model between the agents of the ecosystem, from the offer or the commercialization, all the way to the service provision.

Similarly, the mentality of the user, progressively less worried for the property of the vehicle and now more oriented to the use, obliges insurers to align their offering to the covering of the insurance necessities of this new type of client. Personalization becomes key, leading to products being increasingly oriented more towards the individual and less to the vehicle, more towards the service and less to the property.

The means, throughout they adjust themselves to this new scenario, are the modification and adequacy of their traditional products, converting them now in new differential products or services that allow them to build loyalty among their clients throughout technological innovation.

From this it is concluded that insurers nowadays are in the turning point, where their survival in the market depends directly on their capacity to adapt to these technologies.

 A renewed product design

Insurance companies have had to modify their product design in order to face and adapt to the new necessities of their insured and of the market.

This has given birth to new products, especially designed for the new modalities of mobility, as are the insurance for Renting, Ridesharing or Autonomous Vehicles.

Renting insurance will be focused on providing All Risk coverage, protecting insurance owners or holders, which are Renting companies, and will also protect the transfer of these vehicles from them to the service user, including as well new coverages, such as driver’s insurance (which covers assistance in the driver’s accident and psycho-emotional assistance in the event of a serious accident or theft).

The specific coverage for Ridesharing offers the possibility of extending the conditions of the personal use policy while carrying out the activity of driver for companies as Uber or Lyft without running the risk that the personal auto insurance company cancels the policy for not reporting these commercial activities.

In regards to Autonomous Vehicles, the new products and coverages will have to adequate to the possibility of covering occurrences such as the driving duality both totally autonomous and semi-autonomous and other situations that will have to be protected such as the damage caused by the unauthorized entry and use of vehicles, infringing the identity of the owner. A separate chapter will be the development of coverage policies that protect the insured and automotive terminals before events such as software failures or ransomware attacks and the consequences that these may origin.

One of the advantages that new technologies offer to insurers is the possibility for collecting real-time information about their insured driving behavior. This allows them to improve the underwriting process, being able to offer new products founded on the premise “Pay How You Drive”. Throughout the vehicle’s intelligent devices, mobile applications and a specialized algorithm, the real behavior of the driver can be measured and based on how risky or safe it is, the underwriting process can be tailored to each insured profile.

 The role of technologies, personal data, AI and robotics

Data has always been an asset for insurance companies, being experts in their management and anonymization. However, as any company is susceptible of being hacked, insurers are betting for projects that protect them, aiming at migrating them, as well as their infrastructures and services to the Cloud.

From there, and responding to the abovementioned trend of customization, this personal information is used mainly for client engagement and, founded on it, it is offered the most suitable product for their needs. Likewise, this technological disruption in Auto will generate a higher necessity for the use of this resource in the service provision relatively to the assistance and additional services related to mobility.

Nonetheless, and despite the data technology is still a fundamental pillar for the insurance product design, other are the technologies of greater impact in the Auto sector. This is the case of Artificial Intelligence, that allows to combine computer-created images with reality and so facilitates the processes of sales and training; robotics, embodied mainly in chatbots and virtual assistance; or Big Data, which application in the real-time analysis conditions the offer in the Direct channel. This is something that everis, throughout their Edison asset, is already capable of offering.

 A dilemma that will determine the success of the insurance sector

The insurance sector is facing a previously unknown scenario, full of changes, transformations and evolution, which must not only understand but, essentially, attend.

The change in the consumer behavior, the technological advances and the digital disruption that the automotive industry is experiencing are translated into new challenges for insurers. This is as well an excellent opportunity to enhance digital transformation and to reinvent themselves, staying at the forefront of the market.