The Future of Insurance Podcast – Bryan Falchuk
Founder & Managing Partner, Insurance Evolution Partners and Author of "The Future of Insurance"
Season 2, Episode 25, April 19, 2022
Auto Insurance has faced an existential threat before, when analysts predicted the market would evaporate in the 2020s as people stopped buying cars and instead just rode around in shared, autonomous pods. That didn’t happen, of course.
But the market is going to face another major shift thanks to the coming together of three major developments – Connected Cars, Embedded Insurance and Subscription Business Models.
In this special report, “The Future of Auto Insurance: Connected, Embedded & Subscribed” Bryan Falchuk shares the impact these three drivers will have on Personal Auto Insurance, and what we in the industry should be doing to ensure we not only stay relevant, but find a way to thrive.
Falchuk turns to Guidewire’s Chief Evangelist, Laura Drabik, to host this episode as he talks about this ideas in this report and how the Insurance industry should plant the seeds today to thrive tomorrow.
You can download the report for free at http://future-of-insurance.com/auto thanks to the support of Guidewire Software.
Highlights from the Show
- Thanks to Laura Drabik, Chief Evangelist of Guidewire Software, who graciously agreed to host this episode so I could share some thoughts with you
- Auto Insurance will be dramatically impacted by the development of Connected Cars, Embedded Insurance and Subscription Business Models being adopted by OEM car makers
- Connected Cars – using a wealth of sensors and high speed data connectivity, new vehicles allow for a real-time view of each exposure, which can transform how we look at and price risk, as well as how we can intervene to reduce it; with nearly 80% of new cars sold in the US being connected, this sets the timescale for when materially all cars will be able to be looked at in this way, which will come in the late-2030s.
- Embedded Insurance – rather than being a separate, friction-filled process, embedding insurance into the sales process of the asset or experience you need insurance for can not only benefit carriers, but allows those selling that car asset (like a car) to reduce the risk of problems getting insurance has on the success of their core business model.
- Subscription Business Models – OEM car makers are turning to subscription revenue to drive valuation, especially traditional OEMs competing with the valuation of Tesla and the market pressure that creates for them; most major OEMs have announced plans to shift to subscription revenue models, and many of those have explicitly called out Insurance as a core component of that offering.
- Combining these three drivers, we see OEM car makers using embedding to sell insurance offerings that take advantage of the advanced, connected features they are including in their vehicles to help drive adoption of subscription services (like autonomous driving, vehicle charging, and more).
- OEMs are not likely to be interested in transferring risk to their own capital base, but rather ensuring risk transfer does not jeopardize their core business or quest for recurring revenue, and therefore will look to distribution partnerships to embed insurance into their offerings.
- That means carriers who want to participate in this new Auto Insurance market should think about three things:
- Building partnerships with OEM auto makers, as several carriers have been doing (like Nationwide, State Farm, Liberty Mutual and more)
- Evolving their Underwriting ethos to embrace real-time, connected, dynamic pricing rather than historic-based, Actuarial pricing where rates move in arrears as loss patterns emerge
- Have flexible core systems that are Cloud-native and capable of agile, broad API deployments to connect to a wealth of data sources, external tools, and insert themselves into the customer flow of OEMs and others they may seek to embed into or partner with.
- Lastly, this is not just about Personal Auto, with examples already happening in Homeowners, Commercial Property, Renters, Jewelry, Travel, Personal Accident and More.
- You can download the report for free at http://www.future-of-insurance.com/auto