Nowadays, people are constantly moving around for job reasons and for leisure. The days where people stayed more or less at one place to live and work are gone and changed completely in comparison to how our parents and grandparents lived their life. Still, most of today’s insurance models are from that area and do not take our mobile and modern lifestyle into account. Since there are already new mobility concepts in action, this needs to change soon.
Car sharing is a prime example. As of today, in many cities people can decide on the spot to pick up a car and drive somewhere. Usually it is restricted to a metropolitan area, but if we take a look at Berlin for example this still means a huge area with many different neighborhoods. As within any city, there will be good and bad neighborhoods. And maybe some safe and nice neighborhoods turn only risky at night because they have some clubs and attract crowds from other areas.
Today, insurance models allow to insure the basic risks of driving a car based on minor factors. It is more or a less a yes or no decision, with the deductible as the only possible variable. That is an inflexible and outdated model implemented decades ago.
Possibilities for flexible insurance models based on GPS
Now, imagine what already could be achieved with only the GPS that is included in the car or phone. It knows where people travel and with this data it should be able to calculate risks and adjust the rate on the spot and ad-hoc.
The key factor is that the insurance needs to be calculated on the go, because people might change their decisions and go somewhere else. And they might not even know about the fact that this may be a bad neighborhood or any other impact that might create risks.
To take this even further one could for example take into account that there is also data available that knows the weather. If one combines the information that some bad weather is ahead with the fact that it is Friday evening where dozens of people drive into the weekend, this creates a specific situation.
In this case, the possibility that something could happen is way higher than when driving around on a Sunday morning where there is sunshine and very little traffic.
Insurance models adjusted to mobile lifestyles
Both examples show the opportunity that is already there to create flexible insurance models that really address the customers and their mobile lifestyle. Provide the customer with the information and offer him coverage that makes sense.
The insurance model needs to be based on the current environment and situation and it needs to be transparent, so the customer can decide based on the data and get a customized rate based on his situation.
The same logic can be applied to many other items, as long as they are able to communicate data. For example, similar logic can be applied to create a situation-related insurance model for smartphones.
A smartphone might be more in danger to be stolen or damaged in Berlin on a Friday night instead on a Sunday morning in a small town. And the phone itself knows where it is and what time it is. The device could tell its owner about the risk and offer a rate.
The data is there. Now, innovative companies have to connect the data and provide new insurance solutions, so the insurance of cars and other items can finally move away from models that were introduced decades ago and towards models that fit the current and future way people live.
What do you think about the approach to change insurance models? Would you prefer a flexible model? Share your thoughts in the comment section.
Please note that this article expresses the opinions of the author and does not reflect the views of Move Forward.