This past year has seen many changes in the automotive industry, including rapidly changing consumer habits and the introduction and increased implementation of new technologies that are changing the way drivers interact with cars.
If anything, 2018 has proven just how important it is for insurers to keep up with the latest trends in the market so that they are able to adapt insurance models to meet consumer needs. With this in mind, we take a look ahead at the major issues expected to affect the automotive insurance market in 2019.
Automotive subscription plans
Subscription plans are now available for a huge range of services and have changed the way consumers make purchases so it was only a matter of time before the automotive industry got in on the act. Automakers such as Porsche, Lincoln and Cadillac have already introduced subscription services that allow car buyers to upgrade their vehicles after a certain period of time. This is beneficial to the consumer because they get more frequently upgraded vehicles and beneficial to the manufacturer as it ties the consumer to their brand. Usually these subscriptions offer insurance, breakdown cover, licences, taxes and other costs in one package, which makes them a convenient and attractive prospect for the consumer.
Subscription packages are not just for purchasing vehicles. The mobile app “Whim” designed by the Finnish company MaaS Global is the first “Mobility as a Service” operator. It finds its users the best way to get around using information gathered from all travel services and allows them to pay for their journey all in one place. Users are able to pay as they go or purchase a monthly subscription package. The app branched out into the UK earlier in April 2018 with the first area to be covered being the West Midlands with a full roll out imminent.
Smart vehicle technology
A technological development that is already being implemented but expected to further transform the experience of drivers in the next few years is the introduction of smart vehicle technology. Vehicle-to-vehicle (V2V) technology allows vehicles to communicate with each other on the roads, while vehicle-to-infrastructure (V2I) will extend that communication to road structures such as traffic lights and petrol stations. This technology is set to be instrumental to the future of driverless cars but in the shorter term is already being installed in more vehicles year upon year, with the aim that all new cars will be fitted with smart technology by 2023. (1)
Developments into V2V and V2I technology are already in progress, with more set to follow in 2019 and beyond, with the UK government keen to lead the way as a world leader in the development of connected and autonomous vehicles. One prominent V2I pilot project by Highways England started work in November 2018 to build a “connected corridor” for the A2/M2 in Kent. The project will install wireless technology that allows WI-FI enabled vehicles to connect with connected roadworks, light timings and road conditions. It is expected that a 12 mile stretch of the road will be connected by spring 2019 and, if it proves successful, will be extended further in 2020.
Fitting cars with the ability to measure distances between vehicles and respond automatically to road signals should help to ease congestion as well as reduce traffic accidents. Smart connected cars will have an effect on insurance premiums if research shows that the chances of them being involved in a crash is significantly less than in other vehicles.
Automakers are expected to begin introducing models with AI interfaces in 2019. The software will be integrated into the automotive infotainment system as a virtual personal assistant that can respond to vocal demands, provide real-time information and guide drivers in conjunction with a smart technology system. The system will have many of the features of a smart phone, offering downloadable apps and personal diary management. The number of networked cars is expected to rise by 30% for the next several years, with one in five cars connected to the internet by 2020. (2)
The exchange of data in connected vehicles will allow the industry to collect more accurate information about the way that people are driving than ever before, which will filter through to the insurance market. In the long-term insurers will be able to use data about how the consumer is driving to calculate their insurance premiums.
The way people relate to cars is changing and research shows that people are becoming less emotionally attached to the idea of owning their own vehicle. By 2030 it is expected that 1 in 10 cars purchased will be a shared vehicle.(3)
There are a number of contributing factors to this, including the cost of parking, rising fuel prices and an increased awareness of climate change. The availability and low-cost of ride-sharing services like Lyft and Uber are also a contributing factor and are making more people consider car sharing.
The rise of car sharing is only set to continue through 2019 and beyond. The launch of a new car-sharing app “Turo” allows people to earn money by lending out their vehicles for others to drive, which makes sense when you consider that 4 in 10 Brits say they have gone for more than 2 weeks without using their cars.(4)
An increase in car sharing will undoubtedly affect the car insurance market as it will open up new opportunities for providing flexible and shared insurance plans.
The popularity of electric cars has been steadily on the rise since they were first introduced into the market and this is expected to continue in 2019, with more money being invested into refuelling stations and hybrid infrastructures. SMMT data reported that August 2018 saw 1 in 12 people who purchased a car choose a hybrid, plug-in hybrid or fully electric car. Data also showed the demand for electric vehicles had increased by 88.7% and the sector accounted for 8% of the overall market, the highest figure it has ever achieved. (5)
The expectation that the popularity of electric vehicles will keep growing is also demonstrated by moves made by major companies such as Dyson to invest in their electrification manufacturing. They have just announced plans to set up a manufacturing base for electric cars in Singapore, with the site being completed in 2020, and the first cars launched in 2021. Research recently published by motors.co.uk also showed that 20% of in-market car buyers expect to opt for a hybrid for their next vehicle, meaning that it is likely to overtake diesel for the first time in the purchasing cycle. (5)
Electric vehicles provide different challenges to insurers because they have to consider that cars might be built with specialised parts or require work by specialist mechanics, amongst other differences to traditional vehicles.