Increased Mobility Needs to Have New and Situative Insurance Models

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 That is an inflexible and outdated model implemented decades ago.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.

New and Flexible Insurance Solutions to Address Sharing Economy Risks and Needs

Mobility plays a major part in the sharing economy. With that said a lot of new risks and needs are created and insurance companies are struggling to meet the needs. In our interview, Achim Hepp, Chief Digital Officer for a startup that works on new and flexible insurance solutions to connect insurance companies and startups, shared his view on this part of the sharing economy.

How will mobility shared-service business models redefine or identify the new risk?

As with the overall sharing industry the pace with which new business models for mobility sharing are invented and tweaked is at nowhere near the same speed as insurance companies work. While almost any new business model is creating new setups and new risks, insurance companies are slow – if at all – to recognize them and create corresponding insurance products for those risks.

Only a few years ago nobody would have thought about a model where I simply pick up a car on the go, drive it somewhere and drop it off. Just with a click of a few buttons in an app. And therefore no insurance company was prepared to have the risk of someone damaging that car – or even worse – covered with the policies of the users.

So in that case the sharing companies – which were often backed by car companies – went out and created solutions for their specific product. But it is a whole different story for small startups in that space. Let alone the whole situation from a user perspective.

The exponential rise of the sharing economy is offering a variety of opportunities for the mobility industry. What are the insurance gaps that mobility shared-services currently face?

We still cover the risks in mobility with the same static risk models as before, only on a short term basis. But there is now risk balancing and clever adaption to any specific needs. If for example I’m planning a trip in an area where there is less population and less traffic, the risk of having an accident is much lower that for example in a big city late on a Friday night.

Therefore the insurance should be able to adapt if I provide this information upfront, and in case I change my plans than the data should be able to impact my quote for protection, with me only approving a different rate.

As shared economy is disrupting existing mobility business models, how should insurers redesign their business practices to meet the needs of this new market segment?

Right now we have a lot of models where the insurance is attached to a specific service and a specific company of a sharing model. However, users in the shared economy space usually like to be flexible and use different companies for the same sharing model, depending on their current need. So insurers need to find a model to have people that choose to live in the shared economy and not own – as an example – a car to be covered.

This would mean that they are able to use any mobility sharing service they like and do not have to worry about their coverage. And – of course – make it less static and take the location and all the other data that the user can make available into consideration.

In terms of regulations, what kind of support does the insurance industry require to develop innovative and cost-effective solutions for the mobility shared-service providers?

Basically, all of the big insurance companies are big and complex corporations. This means that usually several divisions need to work together to create a single product that can go to market. This takes time and often they are tangled up in internal fights as well.

Meanwhile the sharing economy is moving fast and by the time they have their product ready that market may have moved already. The solution to this is to work together with small startups, create their own sub-company for new market or do a mixture of both.

In any case they need to have this developed and driven outside of their own corporation. This enables fast and flexible solutions.

The insurance industry is creating new solutions to provide adequate protection for mobility shared-services. Can you give some examples?

Sadly, there are not many examples as there is only little and slow innovation in that space. Insurance companies are not much digitalized and lack modern solutions. That is why they create innovation hubs to catch up and understand the social web and the sharing economy.

A few insurance companies have working models to extend an “old school insurance” to cover an extra driver via an app, but that is it. It is a variation to an old model, just packed into the shiny new interface of an app.

Other solutions analyze your driving and are more focused on you as a driver yourself, but doesn’t impact the whole new approach of the sharing economy and idea of not owning a car. Still those concepts are at least driven by data and using a concept to adapt a standard rate and make it more flexible. This is a model that at least goes into the right direction and can be adapted.

How do you think insurances could be made more flexible? Leave a comment.

Please note that this article expresses the opinions of the author and does not reflect the views of Move Forward.