Moving forward and smarter: how smart mobility is smoothing out the auto road
An eyesight on how both the automotive and the insurance industry are driving together in the transformation road to become relevant in the smart mobility ecosystem. Disruptive technologies powering up mobility options and tech-savvy drivers on the front seat are letting mobility ride faster.
A is for Auto. One of the top and more classic industries and which has and will be experiencing continuous changes, some of them according to its own natural flow and others forced by personas (users).
The idea of designing, manufacturing vehicles and parts, defining risk premiums, processing claims according to a target considered as possible buyers is part of the past. The spotlight has shifted for OEMs, parts manufacturers and insurers; the real target is now on what personas demand around the whole auto concept, what is called “mobility” and if it is possible to develop it in a smart way.
The fast rise of the smart mobility ecosystem
New relationship models emerge as a natural cause of the aforementioned transformation in the automotive industry. Interactions occur between OEMs, car dealers, insurers, startups, TechGiants, technological companies, R&D companies, academia and governments in a liquid ecosystem basis to meet the mobility requirements of empowered personas who are expecting a seamless and fluid mobility experience.
According to NTT DATA’s Insurtech Global Outlook 2020 report, the understanding on the Smart Mobility Ecosystem is not reduced to just thinking that mobility is the use of vehicles or commuting, but with all the time that people spend outside their homes or workplaces and how they decide to move between different points. It doesn’t matter if the trip lasts 1 minute or 10 hours, nor if it is done in a private vehicle, in a commercial vehicle or traveling with unknown people.
The mobility concept keeps changing for different factors such as regulatory matters, car ownership high costs, and environmental awareness. Needless to say, this is the reason all these users demand the appearance of disruptive mobility models.
The spotlight has shifted for OEMs, parts manufacturers and insurers; the real target is now on what personas demand around the whole auto concept.
Smart Mobility may be something new and innovative, but let’s not forget that there is an element that should be always present: the handling of an associated risk. There are several insurers who are already transforming their role and relationship model with startups, drivers, vehicle owners and with autonomous vehicles themselves, but there is still some way to go. According to the Swiss Re Institute, insurers have a key role in the new mobility model. With the emerging digital risks new protection gaps are created and new business opportunities around cybersecurity, IoT risk, counterparty risks and business interruption are raised. Insurers have a key challenge on the new mobility scenario, and it is not about evolution, but about a model transformation by positioning themselves in the first line of the value chain and working together with companies dedicated to mobility and technology. The model transformation should include new services associated to the vehicle usage, as these can help insurers position better themselves inside the market by having relevant data on the vehicle and personas.
Moving on after COVID
The exceptional situation that we have to live now due to the COVID-19 has changed many of our habits, lifestyle and priorities in a fast and radical way. For the Auto industry, the effect of coronavirus has touched several points. The most critical is the temporary or definitive closure of manufacturing operations, as well as the significant drop in car sales, being this last effect directly related to the decline in the sale/use of auto insurance.
With the de-escalation, the population will use mobility as it is something necessary from day to day. However, by not taking some safety measures, the fact of using transportation options where we cannot maintain social distance could increase the risk of contagion (e.g. public transportation, carpooling, transportation, mopeds). One of the options to consider not only in de-escalation but also in the long term, according to the group of Smart Mobility companies in Spain, is micromobility, meaning scooters, bicycles, skateboards, cargo bikes, rickshaws, among others, as a fundamental ally to maintain social distancing.
Car owners may be also asking themselves “why am I paying for car Insurance if I’m not driving?”. In an analysis prepared in collaboration by Sentiance and RISK Insurance regarding data from their users Pre and Post-Corona period came up some interesting insights that are relevant for the Auto insurance industry. One insight is regarding the premium reduction by offering discounts, refunds or compensations to customers; companies like GEICO, Progressive, Admiral, Liberty Mutual, State Farm, Allstate and Nationwide are already working on this way.
Another relevant insight is on the Usage-Based Insurance (UBI) and how the personalization of insurance packages for each customer by either Pay As You Drive (PAYD) or Pay How You Drive (PHYD) can an make rates fairer for their customers. Around the UBI concept, hot investments were detected in the Insurtech Global Outlook report during 2019 from companies like Cambridge Mobile Telematics, Root Insurance and FRIDAY. Also relevant collaborations happen in the ecosystem. Such is the case between the car API developers, Smartcar and the car insurer Paydrive. Both companies are working together in bringing fair and affordable mileage-based insurance to electric vehicle owners in Sweden. Mileage-based insurance models are becoming more personalized for drivers in which they only pay for the mile they drive and the practice of sharing driving data can provide a more accurate risk.
Data will continue to be on the spotlight, in this case for solving claims faster due to the social distancing situation, by motion sensor data of the mobile phone and associated contexts. Important deals from Snapsheet or Tractable were ranked in the Top 5 of the Insurtech 100 global index.
Road under construction
The Smart Mobility ecosystem will not only help the auto and insurance industry survive the changes that will come but embrace them and make them part of their new business models, products/services, customer experience strategies and ecosystem relations. Thinking about the future, personas will easily change from one option of transportation to another according to their mobility needs and of the service portfolio. For this, the Smart Mobility actors must act fast and develop customized offerings throughout digital, seamless and savvy experiences.