The Tinderfication of Car Insurance

Need car insurance? Need it fast? But only need it for a week, a day, an hour? The insurance industry is working on an app for that and it’s described as episodic insurance.

Episodic insurance is being applied to things and events, such as travel, but it’s only a matter of time before it overtakes the automotive industry. Usage-based insurance, or UBI, promised to fundamentally alter the relationship between consumers and insurers, but consumers have dug their heels in on UBI.

Insurers have discovered that only about 10% of all drivers are ever likely to opt into or be coerced into participating in a UBI program, like Progressive’s Snapshot. The ick factor implied in the surrender of privacy has proven to be a bridge too far. And a reasonably clever consumer, like myself, doesn’t have to work too hard to find an equivalently discounted policy without the privacy invasion.

Progressive, which underwrites Snapshot UBI policies based on the time of day and quantity of driving along with hard braking events, was superseded in industry prominence last week by MetroMile. MetroMile obtained $153.1M in new funding for a total of $200M+ for its mileage-based insurance offer and is moving to acquire an insurance broker and expand nationwide. But MetroMile, glorious and compelling in its simplicity, is already behind the curve.

Episodic insurance was pioneered by Trov and its “take a picture and insure anything” model. But the rapidly changing manner in which people are using cars – both more and less usage – is crying out for new approaches. I want car insurance on demand that I can turn on and off as needed.

Service providers like Sure, Slice, Cuvva and Cover are stepping in to the breach to fulfill these needs. We’ve heard a lot lately about cars sitting in driveways and parking lots unused. If your car is kept in your garage for extended periods of time, maybe you don’t need to pay for insurance all the time.

Maybe you go on a few long trips in your car each year, in which case you may want to up our insurance for those trips. Maybe you lend your car to a friend (Cuvva) or drive your car on behalf of Uber (Allstate has a policy for you) some of the time.

The trend toward episodic insurance is building and reflects a level of creativity that moves beyond the blunt force of UBI policies. Episodic insurance opens the door to an auto insurance process that is responsive to the way people actually use their cars. It will also open the door to making insurance more portable, personal and flexible.

The next step will be to make shopping for insurance faster and easier, which is where the Tinderfication of car insurance comes in. Fenris is still in stealth mode, but the company intends to leverage an app-based experience to, in its words, bridge the “bindability gap.”

Once consumers become accustomed to an app-based on-boarding process for insurance engagement, they will be looking for equally slick off-boarding and switching options. Fenris intends to transform the user experience to cement customer-insurer relationships.

There is one other insurance innovator that has seized headlines and attention: Lemonade. Lemonade offers renters and homeowners insurance via an app promising to donate any unused proceeds from client claims to the customer’s favorite charity.

Lemonade bills itself as the first peer-to-peer insurance company. “Instant everything. Killer prices. Big heart.” I have no quarrel with the transformative customer experience. The insurance industry needs this kind of reduction in friction. But the share the proceeds with the charity of your choice spin somehow rubs me the wrong way. I feel like I am being strangled by my own heart strings.

There are also wrong turns worthy of note – as in Allstate’s “risk units” spin on UBI. After too many fast starts or hard brakes you will be expected to download more risk units. Count me out.

The overwhelming change in the insurance industry is toward a streamlining of the customer experience and the on-boarding process. The industry should be mindful of the reality that this tinderfication swipes both ways – easily won customers may be easily lost without the proper retention strategy. (As always, beware of first date hickeys.)

Roger C. Lanctot is Associate Director in the Global Automotive Practice at Strategy Analytics. More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk