This week on Mobility Moments, we sit down with Chris Moore, Head of innovative insurance company ibott (Apollo), to discuss the rise of Insurtech, protecting new modes of transport and the importance of a shared economy.
Chris, the transport sector is going through an incredible transformation. How does the insurance sector develop in parallel to this?
The transformation is at an unprecedented rate and it is on several different fronts. Firstly vehicle ownership is changing with the growth in peer-to-peer sharing platforms, vehicle leasing platforms and car manufacturers exploring subscription services. It is transforming from an ownership model to a pay as you use type service.
As such, the insurance to support the sector has to adapt to this change. It requires a usage-based insurance product typically rated on a per mile or per rental day basis rather than an owner buying an annual policy. We are also seeing the ‘buyer’ of the insurance changing. Rather than individual owners buying insurance, we are seeing platforms offer embedded insurance as part of the ‘rental service’.
How is a company like ibott preparing for a sharing economy on a mass scale?
The culture at Apollo puts the Client first. Rather than creating and selling off the shelf motor insurance products, we focus on the co-creation of unique solutions for our sharing economy clients. The key differentiator for sharing economy platforms relative to traditional companies with large motor fleet exposures is data. The sharing economy is relatively new and many of the large platforms that operate within it do not have 20 years of developed loss history. As such, there are limited tailored insurance solutions available.
However, whilst we do not have long data, we have incredibly deep and insightful data. We run data workshops with our clients to build a unique programme that includes risk factors that are tailored to the risk. We are reinventing the way we use data with our client in order to effectively meet the specificities of their needs. Sharing companies take data seriously. Therefore, as an industry, we must as well if we want to insure them.
For instance, a traditional motor policy will typically take into account the number of vehicles, what they are used for and the people who are driving them. It is rare to see more complexity in the rating than that. With the data sets available to sharing economy platforms, we can provide far more dynamic pricing, often empowered by the digital nature of the business and telematics capabilities within the App.
We can look at specific route-based pricing, unique driving behaviour, time of day risk factors, and advanced vehicle characteristics. This should provide a more accurate way of estimating insurance losses and thus allowing insurance companies to foster long-term win-win solutions with sharing economy clients, which will result in long-term profitable growth.
What are the most significant challenges faced by underwriters when it comes to new mobility solutions such as car sharing?
There are of course challenges and these include uncertainty. Whilst these platforms have huge data available about their operations, they do not have developed loss data, so pricing the insurance to cover the exposures can include this referenced significant uncertainty. However, where there are challenges there are opportunities.
There are still limited insurers willing to consider sharing economy risks and so there is an opportunity to foster long-term partnerships with clients that will provide insurers with the ability to correct pricing (up and down) over time as loss data develops. Sharing Economy platforms, from our experience are equally incentivised with long-term insurance partnership given how important insurance is for their model.
Surely this becomes even more problematic when you introduce this to e-scooter and bike service models?
Apollo is a significant insurer in the E-Scooter and E-bike space. Both the private ownership and the shared services models are set for long-term growth in my opinion. Cities globally are striving to be greener and reduce traffic. Expansion of these services have only been accelerated to COVID as cities look to offer alternatives to public, mass transport. Huge investments are being made in infrastructure to support micro-mobility and consumers are also favouring a private open-air form of transportation.
The effects of the pandemic will last with consumers for years and this will positively impact the adoption of micro-mobility. It is an extremely good solution for the 1-5 mile journeys, which in many geographies will make up over 60% of trips made.
Insuring a new form of transportation is not easy. Even more so in this space as it is such a new model so we do not have a traditional comparison to benchmark against. In this space, more than all others, insurance can actually be a blocker to a micro-mobility company launching in a certain territory. Again, the solution to entering this space where there is uncertainty is a long-term partnership with the client and co-collaboration.
The solution today will likely look very different from the solution in the future but if both parties are agile and willing to evolve the insurance offering and pricing over time as the data develops, all parties should be protected.
How do you see the insurance sector evolving towards 2030, where we will start to see even more progressive transport systems such as autonomous vehicles?
I do not see the rapid evolution of the transportation sector slowing any time soon. I think we will continue to see the adoption of subscription Car services as opposed to traditional vehicle ownership and we will see significant growth in micro-mobility. Clearly, the major disruptor to the sector will be autonomous vehicles and opinions on the timelines for that modality and the way it will be introduced differ.
Theoretically, the largest challenge for AV surrounds the interaction between AVs and human drivers. So will we see AV only lanes? Will they start with long-haul trips before expanding to inner urban areas? You then need to think about the impact on ownership. Will this eliminate private ownership and thus personal lines Motor insurance as a result? Will AVs be controlled by the Automotive companies that are already making statements that they do not plan to sell cars in 5 years?
The challenges for insurance with respect to AVs will be great. Regulation will need to be put in place surrounding AV insurance. Currently, opinions within the insurance industry differ on whether AVs should be covered under a Motor Program or a public or products liability program – or even a cyber liability programme. As an insurance industry, we can be guilty of forcing square pegs in round holes. As such, I think we need to start thinking of a new insurance line – Autonomous Vehicle Liability cover.