Mobility ecosystems and the opportunity for insurers
The insurance industry must change in step with transportation trends, which can translate into tremendous opportunity for the sector.
Mobility expansion across land, sea and air has resulted in large-scale and widespread growth, but the trajectory is changing. While insuring the transportation risks of people and goods has been at the heart of our industry for centuries, mobility ecosystems rapidly evolve.
The insurance industry must change in step with transportation trends, which can translate into tremendous opportunity for the sector.
The changing world of mobility
Urbanization is rapidly reshaping traditional ways of mobility. Currently, more than 70% of people in Europe, North and Latin America live in urbanized areas. Projections show that China alone expects to have 905 million city dwellers by 2030.
The trend applies across the globe. As such, mobility ecosystems are tackling the logistical and societal challenges by offering technology-driven alternatives. Ridesharing services like Uber and Lyft remain the most prominent examples, with a host of other players stepping up to offer ecosystem-connected, value-adding services.
In our urbanized future, technology is essential to providing safe and sustainable transportation for millions of people sharing the same limited space, and for the sake of supply chain resilience. What is happening impacts traditional providers and changes the nature of risk in many ways.
Mobility ecosystems today… and tomorrow
Where do we find ourselves today? While many mobility ecosystems flourish with their key offerings, there is, at this stage, still a great deal of friction when it comes to the desired integration of additional services like banking, health care services, and retail offerings. This particularly concerns insurance integration. As a sector, we are known to be one of the slowest technology adopters. But the world of mobility ecosystems is the place where we can step up and catch up.
Mobility ecosystem providers are constantly on the move. While this is an obvious pun, it’s on point: They are on the move, non-stop, both in the way they operate, and how they augment their services.
Why stop at offering a car service when you can also offer add-ons such as trains, scooters, bikes? Urban Air Mobility will join the offerings in a few years and with it will come drone services. Whatever additional value can be provided to customers, these systems are building and adding new services rapidly. Growing connectivity, greater complexity and more competition around different mobility models will come with new risks. This is a clear opportunity for the insurance industry to become a powerful, protective plug-in of such ecosystems.
With great risk comes great opportunity
Our industry has helped protect every aspect of mobility for a very long time. We have become experts on transportation risk. We made excellent use of our expertise, we leveraged data from across the globe, and we kept pace with one innovation after another. But for the first time in the history of our sector, we run the risk that innovation in this arena may be outpacing us. It is not enough to understand mobility digital ecosystems; we must connect and integrate to keep up so that we may continue to live up to our promise to society. There are new risks, and it is our responsibility to mitigate those risks.
Do we have what it takes? Do we have both the skills and the risk appetite?
At Swiss Re Institute, we’ve been examining this topic in-depth, and we predict rapid growth in several risk pools such as cyber, terrorism, product liability, supply chain and contingent business interruption (CBI) insurance. New risk categories will emerge as the complexity of ecosystems increases, giving rise to new exposures and associated insurance opportunities.
The world around us is transforming with every latest (likely AI-driven) technological advance. Our collective choices, taken over the course of the next few years, will shape the future structure of the insurance industry.
Ecosystems will want to work with insurers if we offer the right capabilities, and that means “modularisation,” or the ability to de- and re-couple different combinations of these services and plug them into varied mobility platforms. We have a lot to offer to orchestrators of mobility ecosystems with our risk expertise on one hand, but on the other hand, is our experience in working with regulators, data protection and privacy issues and much more.
By and large, the insurance industry is still traditionally structured around separate lines of business, but we must learn to integrate and offer flexible products. For example, Uber car owners, drivers and passengers will represent different risks and opportunities on a platform, and insurers, at this point in time, struggle to take a portfolio approach in coordinating insurance and non-insurance products across lines of business.
Insurance offerings can be embedded. Just think of financing solutions for drivers, agents and merchants through working capital loans, and consumer goods financing. Re/insurers could even participate in consumer-to-consumer (C2C) networks, where risks with limited exposure are co-insured (e.g. collision damage on a motor policy).
The takeaway: Ecosystems offer opportunity
With deeper integration into ecosystems, insurers will need to reinvent themselves with a focus on preventing accidents and improving quality of life for customers through advice. Motor insurers may look to diversify into adjacent markets as well as gather more data or increase their value proposition. They should consider expanding in areas such as car safety features, car repairs, safe travel rewards and/or early warning systems.
The future role that insurers play in digital ecosystems will depend on two ‘Ds’: data and design. Data means knowing consumers; everything from their goals to their needs and aspirations. Design means deciding the company’s future structure: Will you stay a traditional insurer? Will you redesign so that you can plug into an ecosystem’s value chain? Or will you go as far as to create your own ecosystem?
In times of rapid technological change, market commentary often tends to telescope the long-distant future into the very near term. Historically, however, most innovation in insurance has tended to happen incrementally, shaped by gradual shifts in customer behavior, risk-absorbing capabilities and, importantly, the regulatory framework within which insurers operate.
Dr. Evangelos Avramakis (Evangelos_Avramakis@swissre.com) is head of Digital Ecosystems at the Swiss Re Institute. These opinions are the author’s own.
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