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The way we move today looks markedly different than it did a few years ago. It’s not only the fact that cars are changing, with the implementation of sensors and autonomous capabilities, but also the way that people are using vehicles that’s causing a shift in the understanding of risk, which in turn is keeping insurance professionals on their toes.
“Some of the key industries and types of developing enterprises that we’re watching are ridesharing, car-sharing, car subscription services, and autonomous vehicle development,” said Maureen Brown, SVP of underwriting at Munich Reinsurance America, and a panelist at the upcoming Emerging Risks & Innovation Summit in New York.
Yet, while these major developments are already underway, the insurance industry is trying to keep pace.
“The insurance industry on the whole is not evolving at the same pace. There are some companies that are the forerunners in developing the coverage that’s necessary because the existing traditional coverage is not for these new types of risks,” said Brown. “Then there is a second tier of companies that are beginning to test the waters, maybe in one state or with one type of risk. For example, they might just focus on ridesharing in one or more states to get their feet wet, and see if they can understand and [be] comfortable writing the exposures. The industry itself is not prepared to insure these exposures on a wholesale basis.”
Where some insurance companies are starting to pay attention is in how developments in mobility sharing will impact the private ownership of vehicles 20 years down the line, according to Brown.
There will be a loss of premium for personal auto insurance carriers. What remains to be seen is how these emerging risks and innovations will impact the commercial auto market.
At the same time, start-ups at the heart of the mobility evolution need coverage, which presents challenges as insurers understand how to underwrite and price these new risks. Many start-ups are just getting off the ground and don’t have the historical information needed to fully assess the risk. There could also be a gap between their future projections, in terms of interest from investors, and actual key performance indicators.
Another impact on the insurance industry stemming from the mobility transformation comes from vehicle usage. This dual usage can have an impact on both the frequency and severity of claims.
“If I’m a car owner I may use my car to go to work and run some errands on my way home, but the car is not being used from 9am when I leave it in my workplace parking lot until I leave work to run errands,” said Brown. “But, if I’m using my personal auto to do ridesharing, now all of a sudden I might be getting up early and doing my ridesharing business, then going to the workplace, and then doing some ridesharing at key peak hours in the evening, because that’s when I can make the most money.” This scenario is an example of how added vehicle usage can contribute to additional exposures.
Meanwhile, another rideshare driver might decide that they want to work overnight. As a result, explained Brown, “You’re going to see different patterns for claims – when they occur, where they occur, how frequently they occur – and the traditional patterns are going to begin to be altered.”
As disruptive technologies and new classes of business in the auto space become the norm, insurance professionals need to get familiar with these risks and understand their implications.
“The new and emerging mobility risks are here, and they’re going to continue to expand and develop. What we need to do is understand them and provide the insurance products that are necessary to help protect individuals and businesses,” said Brown. “At the same time, we need to develop new methods of mitigating these new risks to ensure that both the insurer and the client remain viable.”
Take a deeper dive into this issue at the Emerging Risks & Innovation Summit in May 2019
