The coronavirus crisis is spawning new insurance consumer attitudes as well as new driving and risk patterns. (Shutterstock)
Working from home (WFH) has become the new normal for many organizations that would never previously have considered remote access, or at least not on the current scale. Across industries, these companies are quickly realizing that productivity not only continues but perhaps even improves in the digital world. Technology keeps the workforce feeling connected, makes collaboration with business partners possible, and achieves it all perhaps with greater agility and flexibility than ever before.
Transitioning to a 100% WFH environment has been an immediate and brutal shift for most companies, especially those without a plan for remote access. However, it could be argued that this new work environment flexibility is just one example of a disruptive change to daily life that will be a lasting legacy of the COVID-19 era — one of very few identifiable positives.
As patterns of mobility and transportation on both a personal and commercial level shift, it is likely that another lasting legacy of the pandemic will be changes to the way consumers and businesses buy and utilize auto insurance. It also seems likely that the demand for usage-based insurance (UBI) policies will increase in the wake of the crisis, but it remains to be seen as to how insurers will adapt to this new normal with new products and engagement channels better suited to evolved consumer behaviors and expectations.
A tipping point
As a large part of the world self-isolates at home to stave off the spread of the virus, many individuals will reflect on having to pay insurance for cars that sat idle for weeks or longer. Corporate and mobility fleet vehicles also will be immobilized and underutilized, yet operators will continue to pay the same flat-rate insurance premiums across every vehicle, regardless of usage.
When emerging from lockdown, individuals might also start driving less, as WFH increases and the after-effects of the "essential travel" mindset linger. Financial hardship will also unfortunately remain, with consumers — now more alert to potential life-changing disruption — searching for more price-effective products with reduced ongoing financial exposure.
Pay-as-you-drive auto insurance providers have proliferated in recent years, with dedicated startups like By Miles and Metromile, and large insurers, such as Nationwide and Allstate, all deploying connected UBI programs specifically designed for low-mileage drivers. Penetration in all markets remains low, however, as annual policies continue to largely dominate.
We can anticipate this temporary, but likely lengthy, period of lockdown and reduced utilization to truly accelerate a shift in consumer attitudes, driving individuals and fleets to seek more on-demand options and fairer insurance cover that truly reflects exposure.
Going further, some individuals might forego the ownership of a vehicle altogether, opting for more flexible models, including subscription or car clubs. Already today in the midst of the crisis, some city car-sharing operators are reportedly operating at capacity, with added measures in place to allay potential concerns around cleanliness and hygiene. Flexible commercial lines products for shared mobility operators will therefore likely see increased demand as well.
Amidst the lockdown and pandemic crisis, it is worth noting that some alarming trends have been emerging on the roads. With less traffic and growing pressure on spending as little time away from home as possible, UK police forces have apparently encountered a rise in speeding, as have certain insurers. An increase in fraudulent claims also is expected as financial difficulties mount and police forces are disrupted.
Overall however, unlike hard-hit lines such as commercial and travel, auto is not expected to suffer greatly from an underwriting perspective, with anecdotal reports of claims rates dropping by 50 percent already. But the claims profiles recorded over the next few months will, of course, not accurately reflect the risk fleets and personal vehicles present during the next policy year. Moving forward, insurers will need to be looking at better ways to assess the risk a policyholder or commercial fleet poses. Appetite for tech-enabled, UBI models with real-time capabilities and high levels of accuracy can expect to grow over the coming months.
Beyond simple coverage
The potential the current crisis brings for deep digital transformation throughout the insurance world has already been well-documented. But as insurers and brokers complete the gargantuan IT and logistical tasks required to move operations out of the office, the race to completely digitize processes from claims handling to customer service escalates rapidly.
Once the COVID-19 crisis is over, the transformation will be here to stay. Consumers, too, needing information and answers in a time of high uncertainty, will have high expectations when it comes to communication. As insurers take a hit to reputation amidst bad press and very public debates on exclusions, it is imperative dialogue, clarity in coverage, and user experience quickly improves.
Further than clear and easy communication, consumers will be looking with more fervor for added value from insurance and financial services providers. Already insurers are rapidly deploying innovative solutions, including virtual video services in health care and free breakdown cover for key workers in auto. The use of rewards to influence behavior and increase engagement, which has already been gaining popularity in UBI, has huge potential to grow rapidly in the new world order as insurers go further to retain policyholders and recover reputational damage.
Today, rewards are even being leveraged by some insurers to encourage people to stay at home during the lockdown, a win-win initiative simultaneously reducing exposure and increasing customer satisfaction.
Time will tell
In time, the true impact of the crisis on auto insurance will become more clear — its extent, its hold, its surprises. Undeniably, challenges for insurers will continue to develop as the pandemic intensifies and lockdowns endure, forcing insurers and brokers to review strategies and adapt to the uncertainty. Amidst the chaos, however, anecdotal evidence already points to a change in usage and expectations from personal and commercial policyholders.
Growing demand for more flexible, on-demand coverage based on usage is likely to accelerate, as is demand for more digitized processes and added-value services leading to better engagement and communication. Technology has already been proven to deliver on fairer UBI and improved customer journeys. As demand from consumers intensifies, now is the time for insurers to explore wider deployments and be ready to hit the ground running when a sense of normalcy returns.
Claire Alleaume is the director of market strategy for IMS and Trak Global Group. She can be reached for further information or comment via email at [email protected]. These opinions are the author's own.
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