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Insurers facing the puzzle of the connected vehicle

Mobility is going through one of the most important transformations in its history. The increasing congestion of traffic by fossil fuel vehicles negatively impacts the GDP of some countries⁰ and road transport accounts for more than 20% ¹ of carbon dioxide emissions worldwide, putting increasing pressure on this industry. Jointly, following policies to reduce the public space reserved for these vehicles, mobility behavior and practices are changing: increasing use of VTC, vehicle sharing in the fleet (Moov’in, Free2move), carpooling (Blablacar) and rental car between individuals (Drivy, OuiCar). According to a study by Transdev,the share of expenses for shared or rented vehicles in household transport costs should increase from 1% to 33% by 2050. Finally, new vehicles are becoming real data centers that can be used both by manufacturers and insurers: 16 million connected vehicle insurance policies (use-based insurance) are planned in France in 2030 (for the record, the French fleet today has 52 million registered cars, of which 39.37 million are actually in circulation²) .the French fleet today has 52 million registered cars, of which 39.37 million are actually in circulation²).the French fleet today has 52 million registered cars, of which 39.37 million are actually in circulation²).

 In this new context, insurers will have to adapt to changes in the insurable material (from vehicle to mobility) , risk and their customers (from the individual or the company, to the operator of mobility or infrastructure operators).

Due to changes in consumption, access to information and legislative changes (e.g. the Hamon law which makes it easier to terminate an insurance contract), it is important for insurers to place the customer at the heart of their strategy in order to retain them. This involves increasing the number of points of contact with policyholders and adapting distribution and customer relations to these new consumption patterns (online subscription, mobile use, simple and intuitive customer experience, etc.). The main risk for insurers is to lose this relationship with their customers for the benefit of mobility operators and see their margins decrease.

In addition, it is becoming essential to develop the skills necessary to collect and use mobility data to optimize the value chain and offer new offers and services. Indeed, access to finer data makes it possible to optimize customer knowledge and pricing, reduce fraud, improve claims management and better prevent risk by developing predictive maintenance tools in particular.

Also, the technology embedded in cars opens up new ways of consuming insurance. Many players such as Groupama, Allianz or Amaguiz have developed so-called pay how you drive (PHYD) offers to assess the driver’s behavior at the wheel, using a GPS box connected to the OBD socket, and to apply a premium reduction in case of good behavior. On-demand insurance is also developing: two years after launching the first pay when you drive (PWYD) offer, the start-up Wilov, which targets occasional driving motorists, has raised 3.2 million euros in April and aims to exceed 100,000 customers in the next three years⁴.

Finally, there is an urgent need to address the issues of ownership of vehicle-generated data and liability in the event of an accident. Insurers, along with car manufacturers, developers and regulators must work together to answer these questions and define common rules. In addition, the digital devices of the vehicle now concern strategic components such as steering, braking and speed, it is vital to consider cyber risk as the key issue for new mobility.

Insurers are faced with a questioning of their historical business model and must quickly adapt to these new uses to face pure players who meet the needs of instantaneity and omnichannel of current and future customers. One of the responses that we see emerging on the market is the growing application of their information systems, which allows them to enrich their offers with additional services to adapt to new uses but also to provide their own solutions to mobility operators who are looking for the fastest and most flexible offer to integrate into their solutions.

⁰ Ptolemus UI Report

¹ Europarl

² AAA Data

⁴ Argus of insurance

Rhalid Bouakhris, senior consultant

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