Mobility trends and auto insurance

I was invited by the organizers of the Insurance Canada Technology Conference to participate on a couple of panels and my talks focused on mobility changes impacting auto insurance. I discussed two trends, enabled by technology, that are already having on effect on auto insurance, although many in the insurance industry have not yet “felt” them. The first of these trends is car sharing. And while we’ve discussed this trend is previous newsletters, a refresher might be useful.

Car sharing is experiencing phenomenal growth. In North America, there are over a million members of car sharing organizations. In Canada, that number sits at approximately 140,000 members (source: CarSharing organization). Car sharing us age and membership is expected to balloon by the end of the decade, with estimates ranging from six to ten times the current numbers.

img10So, why should insurers be interested? Well, for one, car sharing means fewer vehicles on the road to insure. In fact, one shared vehicle can replace up to 20 personally owned vehicles. That’s a tremendous impact on auto insurance. In fact, in the US, it is estimated that there are already 500,000 vehicle sales that were avoided thanks to car sharing. As the number of car sharing vehicles and members increase, it would be fair to anticipate that in the future, millions of vehicle sales will be avoided. The automotive OEMs, reading the writing on the wall, have already vertically integrated forward into the car sharing space. Some of these OEMs include Daimler, BMW, Nissan, Toyota and Renault.

Start to do the math. If we have 140,000 members in Canada and these individuals are using mobility options (sharing, transit, bixi, walking) that are helping them avoid the need to purchase a vehicle, these are 140,000 policies every year that are not in the market. We know that approximately 2/3 of the auto premiums in Canada flow through the broker channel. Assuming policies of equal value, this translates into close to 100,000 policies out of the broker channel. Another thing to keep in mind: car sharing results in a move from personal auto to commercial fleet auto. In Canada, a number of regional and national companies provide car sharing services. Clearly, there is not only a reduction in premium but also consolidation of premium. Will car sharing fleets negotiate insurance with carriers? If they deal with a broker, there will be a preference to work with a larger broker.

As car sharing picks up steam, how will this trend impact the smaller brokerage, where personal auto represents a significant part of the business? Will this result in greater consol idat ion of brokerages in this country, precipitating a trend that has already begun? So far, we have focused on personal auto only. However, we know for a fact, that the car sharing trend is expanding into the commercial vehicle space. In Europe, companies have already started looking at sharing corporate cars as a way to decrease costs. To date, an estimated 2,000 vehicles are categorized as shared corporate but thanks to significant savings being realized (in some cases, in excess of 25%), this number is expected to increase to up to 100,000 vehicles by 2020.

Moreover, several European organizations have moved even further by offering mobility allowances to their employees, encouraging them to use various forms of mobility at their disposal (sharing, traditional taxis, trains, buses, …) for their transportation needs. Technology is making it easy for personnel to use practically all modes of transportation through the use of a single mobility card. Technology is also easing the accounting of mobility. A few months ago, we brought to your attention the fact that Government Services in the US was seeking a car sharing service for its entire fleet.

Stay tuned: In the next issue, we’ll discuss ride sharing and implications on insurance.

Catherine Kargas, MBA, ECBS
Vice-President, MARCON

Click here to read the full Newsletter : Future Mobility

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