Aside from health and life coverage, there can be few areas more appropriate for insurtech to assert a benevolent - and mutually beneficial - influence on the behavior of policyholders than in the area of auto coverage.
Telematics offers much more than access to coverage for high-risk groups above and below a certain age. It can reward all policyholders with lower premiums if they are prepared to reduce risk by adjusting their behavior behind the wheel.
Mature markets may face a difficult future, such as Australia and possibly the UK, where the telematics saturation point has been reached even without it being mandatory. More sophisticated insurtech platforms are in development that are expected to adjust the risk - and the premium - as the insured is driving, indicating who the carrier is in real time according to driving risk and location.
Changing role of ownership and mobility
As these systems are developed, telematics will likely have an increasing role to play within underwriting and pricing. The nature of insurance is changing across the globe, as individuals tend to lease or rent cars and are offered a whole of life service. This is expected to include auto coverage automatically as manufacturers operate like a distribution platform.
Mobility as a service (MAAS), where a car use is consumed as a service, is growing in many metropolitan areas. Insurers may finally understand that the route to a profitable auto business is not in the race to the bottom, but likely in developing the auto insurance ecosystem of the future that starts at the cars dashboard.
This is another potential inflection point for insurers to deal with. Without easy access engagement point with the consumer (the dashboard), automakers may be able to take control of the value chain. In time, insurers may have to be content to feed into the new ecosystem in which automakers and their distribution channels represent the sales platform.
Who carries the coverage?
Automated vehicles have somewhat dominated telematics in the debate concerning the future of auto insurance. There is good reason, as the development of driverless vehicles is being undertaken by companies that do not have a transport market pedigree, like Alphabet's Waymo, but see the opportunities of providing MAAS.
This raises an interesting philosophical question as to who the insured should be in the event of an accident - the owner, the operator or the vehicle itself?
As autonomous vehicles enter the market, coverage may shift from the individual to corporates seeking liability coverage, or individual policies for each individual vehicle.
Those companies that do not engage in telematics may find they have no value in the emerging ecosystems as the data generated provides insights for risk reduction and assistance in the event of claims.
The ecosystem is set to develop rapidly, and car manufacturers, if not yet in the driver's seat, are holding the keys.
We see a major shift in auto coverage, moving away from insuring individuals to insuring the vehicle itself. The alternative is that auto insurance will be split, with individuals holding a general third-party liability coverage and the vehicle 'holding' its own coverage against damage.
Players in this space:
Amodo - platform employing usage and behavioral data that helps insurers build direct digital channels and new products.
Bambi Dynamic - Tel Aviv-based platform develops and distributes on-demand and usage-based insurance solutions
bIOTAsphere - ecosystem developer
Carrot - rewards-based telematics insurer
Coverbox - restriction-free telematics-based auto insurer
Octo Telematics - risk management telematics provider for insurance companies
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