From Car Ownership to Car Sharing
The origins of compulsory auto insurance can be traced back to the 1920’s. It signalled the beginning of the end of horse drawn mobility as it was replaced by Henry Ford and the mass production of the automobile. Insurance companies seized on this new form of mobility to provide protection for drivers and their relatively expensive automotive assets at a time when drivers had no cover in place for death, injury or damage.
That was a century ago. And now the auto insurance industry faces new opportunities as we see the shift from car ownership to car sharing is already underway. Over the past 5 years, Google searches for “carpooling” has increased by 80%. Worldwide car sharing has increased by a third and is expected to hit 32 million users by 2025. If Lyft have their way, there will be a million fewer cars on the streets by the end of this year.
These are the beginnings of a huge transformation in mobility fuelled by the shift to electric and autonomous vehicles, increased environmental consciousness, the urbanisation of the workforce, changing human behaviour, and new digitally connected technologies.
On demand mobility makes sense for many drivers
Buying a vehicle can be a big spending commitment, usually second only to buying a home. It’s a decision we typically live with for 5 years, often longer. Alternatively, there is a growing trend towards leasing a vehicle. Let someone else own the depreciating asset. But leasing also comes as a big financial commitment, tying us into a 3- or 4-year term with penalties for an early exit.
And there is the new breed of rental solutions from the likes of Audi, with their Silvercar app-based rental solution and Mobiliti, the start-up vehicle monthly subscription service.
But, whether you buy, lease or rent, unless you drive for a profession, that car is exclusive to you and sits idle for the vast majority of time. Which is why there’s a new way emerging to get from A to B.
In this changing world of zero-hours contracts, freelance working, living in the city and growing environmental awareness, sharing a car (instead of owning it) makes much more sense as the 21st-century method of mobility. It makes sense for many drivers to pay for their mobility as and when they need it. And only when they need it, on-demand.
InsurTech solutions for the on-demand economy
The on-demand economy takes many shapes. A couple of months ago, I looked at it from the perspective of the gig economy for InsurTech Insights. Specifically, I looked at the shift towards ride-sharing, the growth of the likes of Uber and Lyft and their impact on how digital insurance is packaged and provided. For that piece, I sought expert insight from David Daiches, the co-founder and COO of speciality InsurTech platform Inshur.
This month’s theme is Mobility and I turn again to the trend of on-demand, this time from the perspective of self-drive and sharing, whether the mode is a car, scooter or bike.
The question I wanted to answer was how does this shift to shared mobility impact insurance provision? Because we know that traditional cover doesn’t fit neatly in the mobility space.
To answer that question and find out more about mobility and insurance, I turned to 2 InsurTech platforms. One is an old friend of mine, Trov. The other, Voom, a new start-up fresh out of stealth mode with $7m of funding raised to launch their business.
Mobility anytime, anywhere, you choose
About 18 months ago, Trov announced its partnership with Waymo, Google’s Self-Driving Car Project that began a decade ago. Trov had developed their platform to provide software triggered insurance “for a more precise cover for passengers in an intelligent driverless car”. In conjunction with Munich Re Digital Partners, Trov developed a suite of comprehensive protections, enabled by their AI enabled, dynamic and on-demand insurance platform, for any passenger in a Waymo-equipped vehicle on a trip-by-trip, mile-by-mile basis.
This was the start of Trov Mobility and Trov’s move into the on-demand insurance space for personal mobility. Building on the deal with Waymo, late in 2018 Trov announced its partnership with Free2Move, the mobility business from Europe’s 2nd largest auto manufacturer, Groupe PSA. With over 1.5 million Free2move users in Europe, Trov is Free2Move’s mobility insurance partner as it launches its US operations with over 600 “free-floating” vehicles in the District of Columbia.
The Free2Move app gives users a choice from a range of nearby mobility services, such as Communauto, Drivy, eMov or PSA’s own fleet. With the mobile app, users look for a suitable shared car, scooter or bike and, after comparing features, prices and location, Free2Move users book the vehicle for immediate use or reserve it for later. Access to the vehicle of their choice is provided from the app.
The atomisation of insurance
To tell me more about Trov Mobility I called up Ian Sweeney, Trov’s GM of their Mobility business. “On-demand insurance for personal mobility is a natural progression for us,” Ian explained to me. “Trov’s technology provides a comprehensive insurance platform for micro-duration, contextualised, and dynamic coverage. Which is exactly what is needed for the mobility space where the risk profile is dynamic and constantly changing.”
Ian’s point is that a traditional auto policy based on a fixed premium over a medium to long term isn’t going to cut it in mobility. Savings of 30% using Trov instead of a traditional insurance policy have already been reported by Group PSA’s North American CEO, Larry Dominique.
A key success factor for Trov is their reliance on data, machine learning, and what Ian calls “machine-triggered, contextual cover”. For example, the Trov platform picks up digital signals from multiple sources, such as a smartphone, wearable or telematic device, or a beacon. These signals trigger “best-fit coverage” in real time based on the context of the situation. Is the vehicle stationary or moving? Is the traffic heavy or light? What are the weather conditions? And so on.
And the beauty of Trov’s platform is that it can provide and price insurance down to the second. So, if you need a scooter for only a couple of minutes, no problem!
Changing demographics are driving the shift in mobility
Late in 2018, The Harris Poll conducted an online survey of around 2,000 US adults on behalf of Trov. They found that 56% of Americans felt shared transport was more economical than owning a vehicle. And that 1 in 4 Americans would actually give up their vehicle and rely totally on shared usage. This figure rose to 39% amongst millennials (22-37) and was as low as 15% amongst the Boomers aged 54 and over.
The 2018 survey of micro mobility, that is the use of shared scooters and bikes, by the National Association of City Transportation Officials reported 84 million trips taken across the US. This is double the number of trips from a year before.
This is the fastest growing mode of transportation in cities such as New York where the majority of trips are used to get to and from the workplace or to a point of transit. The average cost ranges from $1.25 for bikes used by annual members to $3.50 for shared scooters.
Which brings me neatly onto VOOM.
On demand, telematics-based insurance from VOOM
VOOM recently announced a $5m Series A funding round to launch “the world’s first on-demand, telematics-based InsurTech platform for specialized mobility products.” Headquartered in Tel Aviv with an office in Palo Alto, CA, VOOM will follow in the path of its first product, SkyWatch.AI, which is already a licensed insurance broker in all 50 US states.
To find out more about VOOM and their approach to mobility insurance, I got in touch with Voom founder and CEO, Tomer Kashi.
First off, I wanted to know what they meant by on demand insurance for specialised mobility. Tomer explained VOOM to me. “VOOM creates insurance products for emerging mobility platforms. We operate both as a B2C distribution and risk analytics platform and we partner with global leading insurance companies to provide specialized mobility users with on-demand, usage-based insurance for any device they can ride, fly, or sail.
“Our customers can purchase insurance policies via the VOOM mobile app or online, choosing either a monthly or per-use coverage plan. We have launched our first consumer brands for e-scooters (Voom & Ride), boats (Voom & Sail), and drones (SkyWatch.AI).”
Whilst Voom’s intention is to be a consumer brand, they will also cooperate with mobility sharing platforms so that consumers can purchase insurance via VOOM’s API directly through their ridesharing platform of choice.
Data driven insurance behaviour
VOOM’s risk analytics platform makes use of machine learning, AI and real-time data collection for personalised and dynamic pricing. The type of data collected will depend on the mobility platform being covered, but in general terms, this is mostly a combination of GPS and accelerometer data that analyzes riding, sailing, and flying behavior. It can also detect crashes or near misses. To complement the data collected directly from the device or vehicle, VOOM collects relevant external and contextual data, such as weather conditions and road types, for insight about potential hazards.
Take SkyWatch.AI for example, VOOM’s product for drone insurance. SkyWatch uses telemetry data to provide users with a unique “safety score”, allowing operators to learn and improve over time and ultimately reduce the rate of their insurance premium. VOOM will offer its users personalised on-demand insurance based on these safety scores. Pilots are incentivised to fly more cautiously through reduced Insurance premiums based on higher safety scores.
Tomer explained it like this, “our telemetry data allows VOOM to provide individualized premiums based on a user’s behavior. For instance, commercial drone pilots are able to get up to a 50% discount based on proper operating behavior. Right now, thousands of commercial drone pilots across the US are benefiting from competitively priced insurance cover using VOOM’s product, SkyWatch.AI. In general, costs will be affordable across the mobility space, for example, regarding e-scooters, where the insurance cost is a fraction of the ride’s price itself.”
On demand mobility, user behaviour and insurance aligned
The fast-growing mobility sector is all about on-demand access to a choice of travel options, from bikes to scooters to cars. So, it makes perfect sense that insurance is aligned as a tech enabled, on demand, use-it-as-you-need-it protection product. These new insurance offerings from the likes of Trov and VOOM also fill the gaps that are not covered today. The odds are that rental companies or mobility providers have liability insurance to protect themselves but it doesn’t always follow that the cover extends to the user.
As Tomer put it to me, “With the rise of on-demand mobility services such as e-scooters, we discovered that in most cases, riders are not fully covered in case of an accident. And much more importantly, they are not aware of this fact. VOOM will ensure that users of unique mobility platforms can grab insurance on-the-go from their mobile devices whether they ride, fly, or sail.”
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The author, Rick Huckstep, is an InsurTech thought leader, advisor and speaker. He is the Chairman of The Digital Insurer.