New mobility changes the rate landscape for insurers


Picture this: You leave your house in the morning, get on the ride-sharing bus outside your front door, and it takes you to work. At lunchtime, you have something to do, so you rent an e-scooter. In the evening you want to get some exercise and take the rental e-bike. Once you get home, you reserve a car from a car-sharing pool because you want to visit your parents in another city the following day.

A new kind of mobility

For years, experts have been predicting the end of individual vehicle ownership in favor of combinable shared mobility models. In urban areas in particular, this argument seems to be slowly coming true. Here it is already possible to get around conveniently, self-confidently and, above all, sustainably, even without your own "status symbol car." However, sometimes the bus is too full and the e-scooter is too far away. When it comes to family planning, many young couples are drawn to the countryside, where there are currently quite different requirements for the chosen form of mobility. In addition, drivers in Germany do not seem to be ready to completely give up their cars. This was recently shown by the results of the German 2022 DAT Report, according to which around 79% of all surveyed car owners stated that their own car was indispensable.

Whatever the future looks like, new business models dealing with the topic of mobility are constantly developing along the way there. Always in focus: from owner to user.

Car subscription models

The "car subscription" model, for example, focuses on vehicle use. The "subscription fee" already includes all the costs that also apply to all "normal" car owners. This includes costs for insurance, taxes, and a license, as well as inspection and repair costs. In addition, the vehicle's significant loss in value is also taken into account. Another advantage is that, in addition to the established terms of 12 or 24 months, there is often a monthly cancellation option. This lets me decide on a monthly basis which vehicle I need at any given time and also enables me to "spontaneously" switch between a bus or a convertible two-seater.
In addition to the traditional paths of owning, leasing, and financing, this business model has the potential to provide a fourth way in the future - at least for a transitional period. The model is interesting for both private individuals and businesses, since here, as with leasing, the "subscription fee" can be claimed as tax exempt. The only drawback is the very low mileage rates currently offered by most providers, which means that the car subscription is more suitable for low to normal mileage drivers.

Get into the e-car with a subscription

With the "car subscription," however, new technologies or types of driving can also quickly gain in importance. A German study conducted by CAR in 2022 shows that around 72% of the German car owners surveyed could imagine using a subscription model in conjunction with an electric car. A new type of driving, a new usage model: Will both trends benefit from each other so soon?

Insurers as subscription provider partners

From the point of view of car insurers as well, the "car subscription model" could lead to changes in the development of rates, even in the short term. Since car insurance is already included in most subscription offers, insurers' offers, especially in the B2B sector, must also adapt accordingly. This is already starting on the rate side. In the future, the insurance premium, which is mostly determined by individual rate characteristics, and not least by the biggest lever in risk selection - the no-claims bonus - will be replaced by a "fixed rate premium." This will initially be the same for all car subscription users. But is every subscription user really the same risk from the insurer's point of view? Here it would be conceivable to use individual driving behavior, which would be recorded and evaluated via an app on the subscription customer's smartphone, for example, as an additional factor for differentiating risk or rewarding "good" driving behavior with additional benefits.
However, the benefits side of the rates also needs to be adjusted. The focus is therefore no longer on the insured vehicle, but on maintaining overall mobility. After my car has been damaged, I need to be provided with a replacement vehicle as quickly and easily as possible so that I can continue to use my car subscription. In the event that I need to return the subscription vehicle, as a customer I would like to be protected against unexpected additional payments.

In the future, it must be possible to map the changing rate landscapes in insurance software systems. Modern IT architectures are the prerequisite for this and enable fast, flexible and future-proof product development. For insurers, the only question now is this: Do they have to go to the trouble of developing new software themselves, or should they fall back on the tried-and-tested standard? Standard solutions from inventory management systems, product machines, claims and performance management, or even collection and disbursement can usually be easily integrated into existing system landscapes. In addition, they already include sample processes and products that can be quickly adapted to individual needs. Suppliers are constantly developing their solutions and adapting them to new market conditions. In a joint implementation project, the software is ultimately integrated into the insurer's system environment.

Would you like to know how to make your composite division fit for the future? Then feel free to contact our expert, Simon Dufour, Head of Business Development.

Do you have any questions or comments? Then please leave us a comment.

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