Mobility Insurance: An Outlook on Insuring the Vehicles of the Future

Will Mobility Direct the Fate of Insurers in the Future?

Most of us remember the early days of the automobile industry, when risk-taking drivers received the first collision insurance policy. The time when insurance booths at airports desperately offered last-minute life insurance to anxious travelers during the dawn of the airplane era. It’s since those times that mobility insurance has been part of the picture. And continues to be in! So, to sum it up, mobility insurance is basically defined as the amenities and assistance that are created by insurers to safeguard tourists. These could include their belongings, or other people like bystanders, business investors, or property owners. Any form of transportation could have an effect on them. As per Research Nester experts, the market for insurance mobility is expected to substantially reach twice its current market size, that is, over ~USD 1.8 trillion by 2035.

Personal Mobility

There has been a quantum leap in the market of personal mobility. From horse to bullock-cart, then to bikes and cars, and consequently to sustainable, autonomous, electric vehicles, and probably many more in the coming future. Earlier, there used to be less personal mobility available to people. Public transportation, a bicycle, or a car were pretty much the only available alternatives for transportation. But thanks to innovation & technology, car-pools, bike shares, and electric vehicles have now become a part and parcel of our lives and could be seen driving the global market at its full capacity. Currently, around 18% of people around the world own a personal car. With the growing trend, the sales of electric cars are also expected to reach yet another record level, increasing their market share to close to one-fifth and bringing about a significant change in the auto industry.

Innovation & Mobility:

Two Sides of the Same Coin

A new era of innovation is emerging in mobility. The adoption of electric scooters (e-scooters), predominantly driven by the rising demand for fuel-efficient automobiles and growing concerns over greenhouse gas (GHG) and carbon emissions, has marketed over ~34 billion in 2022 and tends to show a significant trajectory of growth for the next decade. The insurance industry will thus grow parallelly with the mobility industry. The established insurers will be able to handle them. There are numerous instances of large insurers working effectively with insurtechs in other emerging fields, such as on-demand cyber products, protection for shared-used products, and utilizing new wearable and Internet-of-Things technologies to add innovation to their product portfolios. It's important to keep in mind that those insurers have a number of benefits that could prevent them from being cut off from changing client mobility needs. First and foremost because they are a legal necessity for vehicle owners in the majority of nations, the big insurers are ideally situated to forge connections with business clients and manufacturers. Secondly, they can provide manufacturers with a plethora of information about past car ownership that will help them better understand their target market. After the new automobile leaves the lot, car manufacturers typically don't interact much with buyers. An insurer might cease the situation by presenting data collection in exchange for reasonable consumer premiums. They could also give an insight to the manufacturers about their consumer behavior via sharing the same data if required. With this insider knowledge of traveler behavior, insurers are well-positioned to get a seat at the table when new business models are created. It also refers to huge, hitherto unexplored prospects for insurers to engage in novel business ventures by using their data capabilities and consumer insights. As per our observation, some of the techniques that could be brought into practice in order to witness alteration in mobility switch include:

  • 1. Assessment on the Basis of Driving Conduct: Policyholders have appealing prospects to save money when they pay their premiums according to their driving habits. If more offers are made using movement and vehicle data, this strategy may prove successful in the long run.
  • 2. Service-on-Demand: 40 percent of all customers desire to activate additional digital services after buying a vehicle. 50% of owners of premium brand vehicles choose to use these extra services. By offering additional services, such as foreign insurance, passenger insurance, or active driving coaching, at the touch of a button, insurers can capitalize on the substantial demand.
  • 3. Latest Suggestions: Auto manufacturers are playing a bigger role as partners as direct sales of motor vehicles increase. Their sales accounts for more than 30 million globally. However, given the continued popularity of embedded offers - the purchase of a vehicle and insurance from the same source - they should also be viewed as possible rivals. Insurance companies should work to establish alliances that are mutually beneficial inside their ecosystem. For instance, they may use a seamless digital procedure to incorporate a streamlined insurance provision into the buying and selling of vehicles.
  • 4. Mobility Diversity Products: The increase in mobility diversity can be addressed by providers by offering the right insurance products. For instance, they may provide a single product category for anything from personal vehicles to rented electric scooters to vacation rental vehicles. This solution gives the company's insurance services access to new client segments that may not have had that opportunity before. Businesses must embrace themselves for long-term maturation and relevance by evaluating high-potential mobility value propositions and scaling mobility solutions through connected insurance platforms.

Government’s Play in Mobility

Sector-specific regulations can supplement the cap to ensure considerable emission reductions from the transportation sector, especially in the short term. SUV-related carbon dioxide (CO2) emissions are projected to reach approximately 1 billion tonnes globally in 2022, despite a significant increase in electric vehicle sales. For the key emission sources within the transportation sector, the policies need to concentrate on all three parts of the sector. Pricing policies (such as taxes, tolls, and changes to congestion), standards (such as fuel economy standards), and funding for R&D and implementation are examples of policy measures. A transition to low-carbon fuels and alternative vehicle types, as well as the alignment of infrastructure and land use planning with GHG goals, are all objectives that policies for the transportation sector will need to address simultaneously.

Are Insurers Ready?

As insurers get ready for the most recent change in people's mobility, there is ultimately neither an ordinary solution nor a single one. Though the crux of tomorrow is mobility, it is also the crux of insurers' worries. It is an undeniable fact that the mobility sector is about to undergo a profound upheaval. Even if technologies like driverless cars, ride-sharing, and vehicle-on-demand could displace long-established P&C business models, traditional insurers have plenty of opportunities to engage this rapidly expanding market. However, given the likelihood that a cautious approach would fall short of the finish line, insurers may need to improve the ways they collaborate with insurtechs in order to position themselves for success as human mobility trends change in the future. Even from a direct-to-consumer standpoint, insurtechs have improved the viability, efficiency, and usability of insurance solutions. D2C embedded experiences are anticipated to be a well-liked method for customers to interact with insurance for simple-to-understand, known-quantity policies like pet or renter’s insurance. The embedded insurance market expanded by around 40% in 2022, reaching a market capitalization of over $58 billion by year's end. In this new era, insurers would have to thoroughly assess their whole business model, make use of their risk management experience, and adjust to the fundamental changes that are threatening the auto insurance sector with the vision to collaborate with industry experts to protect consumers during their whole travel journey. In order to address the projected fall in auto insurance premiums and make up for this loss, insurance companies will need to come up with new strategies with redefined commercial models. Insurers will need to walk through new competencies in the areas of actuarial, product development, sales, and customer support.

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Swara Keni

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