A recently published report posits that the $200 billion global auto insurance market is at high risk due to a number of disruptive trends.
The report, co-authored by BCG and Morgan Stanley and prepared using data collected from industry and consumer surveys, says that certain disruptive forces—new mobility businesses, emerging car technologies, availability of driver data, digitization, regulation, and world economics—“may lead to steep revenue declines in mature markets . . . a fundamental move away from personal lines to commercial lines . . . a radical shift of future growth to emerging markets and the likely entry of disruptive players.”
The report found that the motor insurance risk pool in mature economies is decreasing due to a sharp reduction in accident frequency following the adoption of collision avoidance and speed management technology, as well as the rising popularity of shared mobility businesses such as Uber. The report’s authors anticipate the motor risk insurance pool to shrink by as much as 40% by 2030 and 70% by 2040.
Although emergent auto technologies such as telemetrics and driverless cars are at their infancy, they could enable non-traditional players such as tech giants, OEMs and telecommunication companies to corner the auto insurance market. Such technology will give these non-traditional players access to proprietary driver data, unmatched analytics capabilities, and direct access to customers. The report expects 55% of today’s drivers to purchase insurance from a non-traditional player, with drivers under 34 years old more likely to do so.
BCG and Morgan Stanley’s researchers expect a gradual shift from personal lines to commercial lines, due to two factors: the increasing use of shared mobility solutions and the risk pool’s shift towards product liability as driverless technology pins greater responsibility on the vehicles rather than drivers. So disruptive are these two trends that by 2030, the personal motor insurance markets in several mature economies could be 70% smaller than they currently are.
With all these trends considered, the paper explained, insurers would eventually face the risk of becoming pure capital providers—especially once they lose ownership of the customer, their advantage in handling data and analytics to price risk, and their ability to manage claims and fraud.
The report concluded that in light of the dynamics present, insurers must quickly adapt or risk being marginalized in a fast-changing insurance landscape.
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