Mobility tech is speeding up as insurance companies lag behind

Remember when Marty McFly time-traveled to 2015 in the movie “Back to the Future Part II” and introduced viewers to the gravity-defying hoverboard? Well, 2015 came and went, and while this sci-fi dream has yet to become reality, it’s safe to say that technology has provided us with other impressive mobility solutions far beyond what Hollywood conjured up three decades ago.

As today’s mobility technology continues to advance traditional means of transportation, new risks emerge while the capabilities of the modern insurance models continuously lag.

Several important changes have taken place in the past decade:

1. New vehicle types: From e-scooters and e-bikes on the ground to drones in the air, the landscape has changed and with it, our ability to commute, reach new places and introduce new business strategies. These affordable, adaptable and accessible means of transportation are bringing with them major changes to cities, infrastructure and landscapes. While we as a society are quick to reap the benefits of these modes of transport, insurance for these new vehicle types is sometimes inadequate.
2. New types of ownership and utilization: The growth of the gig economy, mainly last-mile deliveries, created new opportunities for vehicle owners. We are seeing new kinds of companies that manage large fleets but don’t own a single vehicle and only have occasional interactions with drivers. This complex logistics challenge is met with native connection and constant tracking of each interaction. DoorDash and Deliveroo created an entirely new industry with last-mile deliveries based on bikes and mopeds, and Uber Freight is planning to do the same for interstate freight shipping. These new forms of ownership and pay-as-you-go usage models demand episodic insurance models.
3. Improved safety and connectivity: Today’s mobility devices are powerful data processing machines capable of understanding contextual and behavioral information in order to help make smarter and safer decisions. Each drive, trip, ride or flight is logged with rich telemetry that creates an extensive dataset per driver, vehicle or even location. Connectivity creates meaningful opportunities for better risk models (pay-as-you-drive or pay according to how you drive), as well as unique opportunities for API-based embedded insurance.

While these three mobility trends are disrupting and will continue to disrupt the way we move, they also make it clear how far behind insurance is when attending to the needs of today’s customers.

‘Blink, and it’s gone’

Recent shifts in mobility mean that too often, customers are overlooked, underserved or just overcharged due to the lack of suitable solutions. This also creates a user experience totally unfit for how digital services are expected to behave.

E-scooters are now available in almost every major city in the U.S., but insurance solutions for riders remain inadequate. In the more mature market of motorcycles, while everyone knows how impactful mileage is on actual risk, no one has leveraged connectivity yet to implement a pay-per-mile insurance solution.

So why do insurance companies fail to serve these audiences?

1. Data challenges: In the game of risk analytics, data is king. While traditional insurance offerings have an abundance of data and models, new mobility segments and new untapped data sources remain uncharted and trying to impose old models on them usually ends with inferior products.
2. IT debt: Providing high-end technological services for connected mobility means a lot of systems working and communicating in real-time. This creates a huge obstacle for established insurance companies, which rely on legacy IT systems that are extremely hard to tweak quickly.
3. Siloed teams: Creating insurance products for the mobility industry requires cross-team operation from inception. A new product involves different siloed departments within the company such as the actuaries, product, marketing, IT and more.

The right engine to close the gap

This doesn’t mean that traditional insurance companies are unable to innovate — far from it. They have the talent and experience to make complex projects happen, especially in mainstream markets such as home and personal auto.

The real opportunity for collaboration between established insurers and InsurTechs lies in “specialty” mobility verticals such as e-scooters, recreational vehicles, drones and last-mile delivery. This is where InsurTech companies, typically smaller and more nimble operations that focus on very targeted markets, can excel.

They can tap into new data sources efficiently via APIs to create newer, better risk models and subsequently feed those risk models into purpose-built, born-in-the-cloud policy administration systems that remove legacy IT constraints. Closing all of the loose ends across different expertise functions in a company (risk, product, distribution, compliance) enables InsurTechs to launch products within months instead of years.

By utilizing new data sources to insure previously overlooked risks, InsurTech companies provide tech-driven solutions and products for otherwise neglected modes of transport.

Tomer Kashi (tomerk@voominsurance.com) is CEO and Co-Founder of VOOM, an InsurTech company for new mobility. These opinions are his own.

Previously, Tomer spearheaded interdisciplinary technology projects from within the Prime Minister’s Office in Israel. He holds an MBA from Tel Aviv University and a BSc in computer science and physics from The Hebrew University of Jerusalem. He is based in Tel Aviv.

Keep reading:

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• Scooter risks? Popular transportation fad brings accidents & liability questions
• Electric scooter popularity spells opportunity for insurers