Insuring the future of mobility

The insurance industry’s role in the evolving transportation ecosystem

New York, NY (May 27, 2016) – If people stop driving, what will auto insurers, well, insure? The rise of ridesharing and autonomous cars – as part of the new mobility ecosystem – means that the insurance industry should reconsider its time-honored business model. While some revenue streams will likely dry up, new ones will begin flowing.

Introduction

Since the first personal auto insurance policy was written over a century ago,(5) the basic insurance model hasn’t changed much: Policies are typically written on a vehicle-by-vehicle basis, protecting the owner and driver if the vehicle is involved in a collision, stolen, or otherwise damaged. It’s clear, straightforward, and as established as almost any business practice.

As ridesharing, carsharing, and autonomous vehicles increasingly replace traditional models of automotive transportation, insurers may have to rethink their role in the mobility ecosystem and their relationship to drivers, owners, and vehicles.

Now, the future of mobility looks poised to upend that model and change nearly everything about auto insurance: who the customers are, what products they demand, and how to market to them. Indeed, as ridesharing, carsharing, and autonomous vehicles increasingly replace traditional models of automotive transportation, insurers may have to rethink their role in the mobility ecosystem and their relationship to drivers, owners, and vehicles. For future underwriting models, insurers will likely need to consider the advent of safer vehicles, new vehicle designs, and new sources of risk and liability. This likely means:

  • A decrease in the frequency and, over time, the severity of loss events;
  • Changes to vehicle repair and replacement costs;
  • New customer categories and the creation of new insurance products.

While widespread availability and adoption of fully autonomous vehicles may be a few years away, carsharing and ridesharing are already gaining traction, particularly among the young or those living in higher-density urban environments.(2) For insurers, shared mobility reduces the number of vehicles per capita, challenges vehicle-centric underwriting, and will likely give rise to large fleet operators, meaning:

  • A shift of the product and premium mix for passenger vehicles from individual buyers to commercial buyers;
  • The expansion of driver-centric policies and introduction of per-use policies;
  • An increase in the prevalence of self-insurance by larger fleet owners as an alternative to purchased coverage.

While demographic shifts are gradual, technology is advancing and social attitudes are shifting at a fairly rapid rate. Ridesharing trips have nearly tripled in five years in the United States,(3) and six states and Washington, DC, have already authorized the testing of fully autonomous vehicles.(4) With the emergence of a fundamentally different future mobility ecosystem, insurers have an opportunity to shape the auto insurance markets of tomorrow.

The Future of Mobility

In our article The future of mobility, we conclude that four future states of mobility will emerge from the intersection of two key trends, the emergence of autonomous vehicles and shifts in mobility preferences, giving rise to shared access to transportation.(5). Download the full article.

The first step in a long journey

The new mobility ecosystem’s impact on the insurance industry will be wide-ranging and complex, touching nearly every part of insurers’ businesses. This paper provides an overview of our initial thinking about those impacts, but there will be much more to explore as the topic continues to evolve. The effects of this seismic transformation extend far beyond the insurance sector and affect consumers, passengers, corporations, and governments in myriad ways.

We intend to publish further articles that explore additional elements of the future of auto insurance and the future of mobility, and we invite you to join us on this ongoing journey of discovery. You can always find our latest thinking at dupress.com/future-of-mobility.

About Deloitte University

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Notes

1. John A. Bogardus Jr., “‘A gasoline can on wheels’ – spreading the risks: Insuring the American experience,” IRMI Update, January 2004.

2. Phililp Cardenas, Uber head of global safety, “Our commitment to safety,” December 17, 2014.

3. Susan Shaheen and Adam Cohen, Innovative mobility carsharing outlook, Transportation Sustainability Research Center, University of California, Berkeley, Fall 2014.

4. National Conference of State Legislatures, “Autonomous / Self-driving vehicles legislation,” April 8, 2016.

5. Scott Corwin, Joe Vitale, Eamonn Kelly, and Elizabeth Cathles, The future of mobility, Deloitte University Press, September 24, 2015.