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As Auto Insurance Premiums Shrink, Insurers Need Mobility Ecosystem, New Study Finds

In today’s rapidly changing world, the role of the automobile has changed significantly – especially over the past 10 years. The rise of the smart phone, increased digital presence, shifting demographics, declining car ownership, and the growth of ride sharing have converged to end of the status quo for auto insurers.

In “Rethinking Auto Insurance: From a Transactional Relationship to a Mobility Customer Experience,” a new white paper by Majesco examines the history of auto insurance and how the industry must respond to these changes.

“The industry status quo for auto insurance is rapidly eroding. Insurance is being re-defined with a growing number of influences, upending decades of business assumptions. In this new decade, a new auto insurance opportunity exists for those who will participate in a broader mobility ecosystem and the growing insurable opportunities.”

One of the biggest trends impacting auto insurance is the decline in auto ownership. According to a survey from Cox Automotive, nearly 40% of Americans agree that having transportation is necessary, but owning a vehicle is not. Among Millennials, the rate jumps to 45%, and for Gen Z it jumps to 55%. This implies that while mobility options are important, they can be fulfilled by many means beyond traditional vehicle ownership -- a significant shift impacting business models for both auto manufacturers and insurance companies.

These and other changes have resulted in the reduction, reallocation, or elimination of a large portion of auto insurance premiums, Majesco finds. To retain customers and revenue, insurers must shift their focus from auto insurance transactions to a broader mobility experience that redefines and includes:

Insurance product: Redefining products (risk, services, experience) requires insurance to participate and play within ecosystems, rather than simply existing as a stand-alone ecosystem

Mobility policy: A single unified policy to cover whatever mode of transportation a customer chooses, instead of separate policies for each

Value-added services: Provide risk protection services as a component of an ecosystem that establishes one place for all of a customer’s “jobs” across their mobility customer journey – providing a powerful, single engagement and eliminating friction points between ecosystem participants

Continuous underwriting: Constantly updating a customer’s risk profile that changes the terms and pricing which is influenced by the continuous flow of data from autos, telematics and IoT devices.

“Auto insurers must reimagine the scope of what they will offer to customers – an experience with a risk product, value-added services that are part of a broader mobility ecosystem, and a compelling customer experience. This is where exciting new business opportunities await,” the white paper finds. “And where new competitors are emerging including automotive companies, rideshare companies and others.”

To access the complete Majesco study, click here.

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