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As on-demand transportation and ride-sharing continue to evolve and surge in popularity, the insurance industry will need to adopt a new approach that supports this emerging technology and innovate to match the demands of the sharing economy.
The move to on-demand services, the impact of driverless vehicles and the growth of electric vehicles are shaping personal mobility. Major global forces are driving these changes, such as urbanization, millennial social habits and a surge in ride sharing. An additional 2.5 billion people are expected to live in cities by 2050, and ride-sharing is expected to account for more than 25 percent of all miles driven globally by 2030. Simultaneously, millennials and urbanites are gravitating toward a pay-per-use model rather than purchasing vehicles, fundamentally challenging today’s mobility consumption model centered on personal car ownership.
The future of insurance must keep up with the future of transportation, which will create opportunities to explore new trip-based insurance models. Insurers will have to offer micro-duration, on-demand insurance for personal mobility—a platform where people can easily pay for the protection they need only when they need it. And it must be seamlessly incorporated into the overall experience so that the user doesn’t have to navigate cumbersome and complicated policies.
Outdated Models and Legacy Systems
Today’s insurance industry is hamstrung by outdated insurance models and legacy systems that do not offer dynamic policies fit for tomorrow’s transport needs. Limited by antiquated processes, insurers struggle to innovate and give consumers the technology and service they expect. Individuals’ needs, now change on a daily or weekly basis, while traditional insurance policies assume unchanging needs over the typical annual policy period. Insurers typically want data before any underwriting, so don’t have the agility to pivot and provide appropriate coverage as needed.
The future of the auto industry isn’t in car ownership, but in changing forms of mobility made possible by the sharing economy. For example, Toyota recently announced it has expanded its Toyota Connected global mobility solutions business unit, which supports the growing adoption of advanced mobility services, to Europe. Auto manufacturers are expanding their business models to keep up. Consumers can now buy access to the vehicle of their choice for an hour, a day, or month. As a result, traditional insurance companies need to adjust their business models to keep up as well.
Putting People First
Insurance companies are not typically known for putting people first or have offered best-in-class consumer experiences. In the sharing economy, the companies that thrive are those that prioritize intuitive user experiences at a level of quality people are accustomed to from consumer apps like Uber and Airbnb. For insurance, this means investing in or partnering with technology companies to reimagine the user experience for insurance and mobility.
Smart Coverage for Mobility
As people move from point A to B, they now use multiple modes of transportation. We’re in a world where contextual triggers can now turn protection on and off as needed, regardless of the mode of transport. This can be accomplished through manual triggers, scheduled triggers, geo triggers or event-based triggers. This is the future of smart coverage for mobility.
Mobility innovation is complex. Changes in infrastructure and regulation as well as industry players collaborating will be necessary to effectuate the change consumers desire. The successful insurers will be the ones that partner with a broad range of companies looking to create the right solution to protect people, vehicles and things in an era of rapidly changing personal mobility.