Vehicles are now about mobility. And car insurance is in the midst of a big change. If you watched the Superbowl last Sunday and, like me, waited for all the commercials, you probably saw two particular ads that have implications for the future of auto insurance. Netflix’s partnership announcement with GM, which promises to use more electric cars in its shows, and the announcement of Dodge’s new electric car – which means that now all three of the traditional American big three automakers have electric trucks.
This highlights the rapid growth of EV and autonomous vehicle use, but the growth of EV and autonomous trucks is likely to be one of the “revolutionary”; innovations of our time, even contributing to the continued rapid growth of truck sales in the future. This is just one story in the epic sweep of technological change in automotive circuits, but this story has a twist that also involves home insurance.
Two traditional concerns for truck buyers are:
- Driving distance — is the gas tank large enough to reduce filling?
- Traction and traction — is there enough horsepower and torque to easily carry heavy loads?
For an electric truck to compete with a gas truck on both of these points, the EV batteries must be very large and powerful. In fact, they must be so powerful that their power rivals home backup battery systems. The Ford Lightning has been compared to owning 7 Tesla Powerwalls (a home backup battery system).[i] Knowing this, engineers have created advanced electrical panels and systems that can handle bidirectional charging – charging that can feed power both into and out of the home. Both Ford and GM trucks will have the ability to do this; power home if the power goes out (up to 21 days, according to GM), just like a backup battery or generator. GM also theorizes that many EV owners will feed power back into the grid.
In fact, GM recently spun off GM Energy, a new business unit dedicated to “EV-related products for residential and commercial customers.”[ii]
But when you combine the growth of solar panels (for charging electric cars) and the need for advanced electricity in existing homes, some of these mobility trends can create risk for new home properties. This is just one more way that barriers are being reduced in the insurance industry.
Mobility — risk in motion
The automotive world is changing rapidly in all dimensions due to the change in how other businesses and industries are changing, such as carpooling, the use of other mobility options such as electric bicycles, autonomous vehicles, changing views on vehicle ownership, advances in vehicle technology, along with a growing plethora of transportation options such as car sharing.
Non-insurance companies are coming together around a move to ‘mobility’. Mobility options are important, but they can be fulfilled in many ways beyond traditional vehicle use or ownership…a significant shift affecting business models from car companies to dealerships, rental car companies, carpooling companies, car sharing companies, insurance companies and more. Risk exists in all aspects of mobility. Seattle, for example, is known for its high pedestrian injuries and fatalities. Urban dwellers increasingly live without vehicles, but they still move from place to place and still run risks.
Highly networked, data-driven business models for mobility are emerging rapidly, primarily outside of insurance. Auto companies like Tesla, Ford and GM are leading this shift along with ride-sharing platform companies like Uber. They are redefining the customer journey and the entire customer relationship across a wider set of transport or mobility options. As a result, the threat to car insurance for insurance companies is to continue 100+ year old point of view — view a policy as a transaction.
In Majesco’s recently released Consumer Survey Report, Enriching Customer Value, Digital Engagement, Financial Security and Loyalty by Rethinking Insurance, we look at customer trends through the lens of insurer impact. We use these trends to consider how data usage and a holistic view of the customer can help insurers become more relevant to a changing mobility environment.
In today’s blog, we’ll look at survey data and consider three ways insurers can meet customer demand:
- Personalized pricing with data
- Meets the demand for value-added services
- Expands channel options
Personalized pricing with data
In the digital era of insurance, data is the fuel for optimization and innovation. New technologies, demographics and behaviors are driving the explosion of data and will drive growth and leadership positions for insurance companies over the next 10 years. At the forefront of this is car insurance.
Interestingly, there is strong alignment between both generational groups in using new, non-traditional data sources for personalized auto insurance pricing as shown in Figure 1. Connected devices (and other data sources) enable pricing based on mileage, usage and driving behavior , which could lower premiums and address the top-of-mind financial issue for consumers.
Acceptance is increasing.
Gen Z and Millennials’ interest in using every data source (all sources scored 75% positive approval or higher) reflects this generation’s openness to align insurance with their data. Gen X and Boomers who are rideshare drivers or use self-driving capabilities have exceptionally high levels of interest in using vehicle data for pricing. As vehicle companies move in this direction, the pressure will be on for insurance companies to offer similar pricing options.
As work options shift to remote/hybrid and less driving as a result, consumers are increasingly interested in pricing based on actual vehicle usage and driving behavior, rather than the traditional approach. The changes in work options continue to dramatically reduce the number of miles driven, spurring increased interest in data-driven and behavior-based insurance.
Figure 1: Interest in new data sources for car insurance pricing
Demand for value-added services
Gen Z and Millennials are highly interested in value-added services included in their auto insurance, as reflected in 80% or higher responses to all 10 items, as seen in Figure 2. Gen X and Boomers share their highest interest with Gen Z and Millennials on five of these items. Three of these focus on safety-related alerts: detect a crash and alert emergency services; road condition, traffic and weather alerts; and vehicle recall alerts. The other two focus on keeping their vehicle in safe operating condition and in compliance with license and registration renewals. Increased use of vehicle safety technology places more emphasis on prevention and less on traditional replacement.
With all the changes in vehicles and their use, insurers must proactively rethink traditional auto insurance from a distinct transaction to part of a broader customer mobility solution that adapts and changes in real time based on customer needs and behaviors.
Figure 2: Interest in value-added services with car insurance
Expand channel options
Traditional channels remain dominant in auto insurance purchases, with a preference for company websites and agents/brokers reaching the 90% level for both generational segments. (See Figure 3.) All other channels fall below 80%, but almost all channels have high interest. Vehicle purchase/lease is second highest for Gen Z and Millennials at 79% and 61% for Gen X and Boomers. The strong showing of this channel is another highlight of the growing popularity of built-in insurance, which is a great fit for vehicle purchases, rentals and leases.
Again, the use of a 50% reference line highlights the dramatic gaps between generational segments across channel options. Gen Z and Millennials’ interest exceeds 50% on 14 of the 15 channel options (93%), while Gen X and Boomers only have 8 of 15 (53%) above 50%, underscoring the need for expanded channel options to reach the younger generation when and where they want.
The new and high-tech channels reflect all the built-in insurance opportunities for the younger generation, a growing area of focus for insurance companies and vehicle companies. The new and expanding range of channel options now available, particularly the exciting opportunities for embedded insurance, will provide innovative insurers and their partners with enormous opportunities for growth, with new markets, new offerings and satisfied, loyal customers.
Figure 3: Interest in channel options for car insurance
In Figure 4, we can see these trends from the perspective of generational adaptation. Traditional insurers’ website and agent/broker channels (in the upper right corner) show both their strength of preference and high levels of intergenerational agreement. The chart also highlights the attractiveness of six other channels for the car insurance market: carpooling companies, affinity groups, embedded in vehicle purchase/lease, comparison sites, car dealers and vehicle manufacturer websites.
Figure 4: Generational Congruence on Interest in Car Insurance Channel Alternatives
Easy channel usage against GAFA marks
Of course, channel interest is also a reflection of current perceptions. In any case, the respondent somehow considers how easy or valuable they perceive a channel to be. This is one of the reasons why we often ask questions about Google, Amazon, Facebook and Apple. If these common customer brands are perceived as easy for other transactions, will it be factored in when a customer is considering where to buy their car insurance?
In Figure 5, we see an interesting trend regarding Amazon. It has achieved growing interest in recent years with Gen Z and Millennials as a channel option for car insurance. The interest rate increased by 12 percentage points in 2021 compared to 2019 but was slightly lower at 59% in this year’s survey. In contrast, Gen X and Boomer interest in Amazon as an auto insurance channel is somewhat lower and has remained stable, but should still be considered an important and useful channel for a significant portion of the Gen X and Boomer market.
Figure 5: Trend in interest in Amazon as a channel for car insurance
Holistic approaches to insurance ecosystems
The combination of technology and customer expectations is Immediately impact insurance by changing the traditional ecosystem of agents and brokers, to new channel ecosystem options such as built, automotive, transportation companies, big tech and more. In doing so, it breaks down business and market boundaries to fluidize ecosystems, based on customer needs and expectations of both the risk product and other value-added services identified in this research. This creates greater value for insurance companies through new revenue streams and access to a wider market through the multiplier effect.
Insurers must consider these impacts, however, outside of a single industry. Majesco’s report not only connects all personal lines, but it highlights the idea that insurance is now, more than ever, part of a holistic approach to financial well-being that should be viewed as a whole…as often as it is viewed through a singular line . Our example of electric cars “engaging” with the home in a symbiotic electrical system is one example – boundaries are falling. How do risk profiles change with the use of these new mobility options? It is no longer black and white.
Who we are as mobile people – switching seamlessly through modes of transport and life/work needs – needs to be recognized by insurers through personalisation, relevant products and a full understanding of how and where we want to buy.
For a complete look at customer sentiment and insights on insurance needs, products, services and channels, be sure to read Majesco’s Thought Leadership report, Enriching Customer Value, Digital Engagement, Financial Security and Loyalty by Rethinking Insurance.
[i] Csere, Csaba, Can Your EV Power Your House?, Car and Driver, 11 May 2022. [ii] Newcomb, Doug, GM Establishes New Unit to Connect Electric Cars to the Grid, Automotive News, 11 Oct. 2022.