Motor insurance has to evolve with new possession ideas – Automotive World
Car ownership as we know it is over, writes Darius Kumana. It's time to transform traditional auto insurance
The language we use regarding automobiles and the use of automobiles is quickly becoming obsolete as the industry has undergone one of its biggest changes since the introduction of the Ford Model T. Just the phrase "go to the dealership to buy a car" contains two anachronisms. Nowadays, very few people “buy” a car in the classic sense. According to the Finance and Leasing Association, 93% of new vehicle transactions in the UK were financed to private individuals last year.
In addition, the word "dealer" assumes that you are going there to get a deal; H. to haggle for the best price. Increasingly, however, car companies are switching to direct sales. With this model, which was initially introduced for electric cars by brands such as Volkswagen, the car companies sell themselves, either through their "agents", who we used to know as dealers, or online. The idea is to give the customer a much wider choice of ways to get into a car, none of which require haggling.
Ford is known for making cars cheaper with its repeatable manufacturing process. However, it was General Motors' innovation – that made it possible to buy cars on a financial basis – that really opened up access to cars to the masses. Currently there is another radical shift in the way mobility services are provided, paid for and bundled. Personal mobility becomes something you can access when you need it.
Many customers have not measured their automotive needs for years. Instead, they want the same flexibility that they get with other digital subscriptions like Netflix or HelloFresh. Find
The change is coming because automotive brands are realizing that many customers have not measured their automotive needs for years. Rather, they want the same flexibility as other digital subscriptions like Netflix or HelloFresh. This flexibility applies not just to the car itself, but to everything related to the car, including the services offered in the car and services related to “property” such as insurance.
As newcomers like Tesla change the game, established brands must now respond to evolving customer needs or risk losing their competitive advantage. The rich legacy of brands like Land Rover, BMW, Ford or Renault now needs to be augmented with a much more digitally-led experience that seeks to remove many of the sticking points in traditional ownership.
Auto insurance is one of those sticking points as it exists today. On the one hand, it usually stands apart from the acquisition of a new car. It's something customers usually reluctantly buy after the transaction and before delivery. The process requires them to estimate their next year, be it the number of kilometers traveled, the type of driving (business, personal, or both), or even job status.
In a more flexible future, however, this will be more embedded in the transaction process. Instead of asking on the order screen, “Would you like some fries with that?” It becomes a check box to tick. And you no longer have to guess your future in the car or make general assumptions about your driving. It will know as you drive.
Porsche Passport offers members the on-demand use of up to 22 model variants
Change is facilitated by connectivity. The ability to query cars via their sensors after leaving the showroom enables car manufacturers and service providers to extract data and interpret it for the benefit of the customer. Connectivity and digital interaction also enable this new flexibility in the world of car ownership. The subscription model from Porsche, Volvo and Jaguar Land Rover enables customers to change cars faster than is possible with conventional financing. This requires car companies and other business units to remotely track the fleet.
If the first driver of a new Range Rover decides to upgrade to an even newer model six months after their subscription expires, the company that ultimately owns the car must match it with the next customer and keep a close eye on it remotely for total kilometers and Signs of excessive wear and tear.
The same goes for insurance. The subscriber will not be pleased to hear that the flexibility offered by their car brand to change vehicles will trigger a contract change fee from their insurer because subscriptions do not fit their business model. Insured drivers should be able to seamlessly update their policy, either automatically or with a few taps on an app – like everything else
What if the next vehicle isn't even a car? The micro-mobility subscription service Swapfiets in the Netherlands, for example, offers bicycles and e-bikes, while electric scooters and cargo bikes also become car replacements for certain journeys. Insurance needs to follow this trend and allow people to make the swap with ease.
The switch to autonomous driving also presents insurers with another interesting challenge. If they are not involved in the process when the customer gets in, be it for an afternoon or for half a year, then the division of the autonomous function becomes very difficult.
Volkswagen has talked about offering autonomous functions in customer vehicles as a pay-as-you-go service in the future
Because autonomy will, at least initially, be a decision made by the driver. Volkswagen has spoken of offering autonomous functions in customer vehicles as a pay-as-you-go service in the future. It plans to charge around 7 euros ($ 8.30) for hands-free calling, for example on a long vacation trip. If this option is triggered, the insurance must adjust immediately and seamlessly again. In the future, autonomy may be the rule rather than the exception and insurance may have to adapt if you plan to take control on an interesting route.
This scenario immediately gives brands that offer embedded insurance the advantage. The one who calculates in real time the impact of the driver's decisions on his risk status will also offer the customer the best price because he knows everything. If an incident does occur, the data from the car's sensors quickly determine what needs to be repaired and when, and provide a reliable estimate of the costs – even ordering and delivery of the required parts is automated.
Business models in the automotive industry, which traditionally only reacts slowly to changes, are even more difficult than the language. However, the current transition to electric, connected, autonomous and flexible ownership is happening at such a speed that older brands are struggling to adapt without embedding the experience much deeper into the customer journey.
About the author: Darius Kumana is Chief Product Officer at WRISK