There’s a useful mantra that with technology adoption in society the big changes tend to always appear far away from our human perspective of the horizon, looking into the wrong end of the telescope shall we say. But when change does arrive, at the tipping point, it usually happens incredibly quickly. Consider that in the space of just over ten years the world leader in ride hailing has grown from zero to having over three million drivers and vehicles in service. It has delivered over six billion journeys and it now has annual revenues of over $50 billion, placing it in the middle ranks when compared to the largest automotive OEMs in the world in terms of revenues.
With the tech giants, and the smartphone OEMs with their app partners, the car rental companies and car clubs all converging to compete on the traditional ground of the global automakers, it’s not difficult to see that some major changes are happening in mobility and car ownership.
Increasingly fleet management services are diversifying from the traditional areas like finance, telematics, risk and safety, maintenance, interim car management, towards driver-related services like travel cards or mobility cards, corporate car sharing and multi-modal solutions.
Whilst 40% of the total cost of ownership (TCO) of a typical fleet vehicle is the cost of the car itself*, it’s the other 60% – including insurance, depreciation, servicing and other costs – which is expected to grow, becoming highly digitized, and with many new routes to growth for the automotive OEMs themselves, as well as other ecosystem players like the tech giants and the ride hailing companies.
Attitudes are changing, as technology and digital connectivity now define that access to car usage is no more than one click away for most people living in major cities.
Over one third of drivers ready for new usage models
In a recent global survey, 37% of car owners revealed they would like to give up their car or that they could get by without it. Another warning sign for the ‘car culture’ is the fact that 3% expect to be a car owner for less than a year, and another 17% reported they will give their car up sometime within the next five years.
If forced to choose between their smartphone and their car, 30% of car owners say they would rather give up their car than their phone. But within this overall shift in attitudes there are different consumer segments emerging: there are the (i) older drivers who are most likely to say they their car is essential and they couldn’t give it up in almost any circumstances. There are the (ii) rural dwellers outside of city transportation who also strongly value car ownership. But this group can see a distant future without cars and they understand and value multi-modal and interconnected transport options.
Then there is a segment of (iii) younger drivers emerging, approximately 30% of the global population and rising, who are ready to give up their automobiles today. This group are very conscious about energy use and green issues, and even though many of them are car owners in the traditional sense, they are ready to switch to other options within the next one to five years.
So the connected car is going to continue driving shared ownership and it’s going to enable more people to rent a car for short periods of time. It’s the continual cost improvements, the new business models enabled by digitisation, with the power of customer data and customer insight that is going to drive more shared ownership.
Ultimately all of this is going to challenge the insurance industry as we grapple with managing data and securing a good customer experience in this new type of open ecosystem. From the traditional split of personal lines and commercial fleet products, we can see the dawning of new B2B2C (business to business to consumer) models of insurance products, and a greater demand to make risk data available in new parts of the consumer relationship.
One example would be an Uber driver with a commercial motor policy for all his or her uses. With a change in circumstances, and when no longer driving commercially, the policyholder would go back to a standard personal lines policy, but at this point his or her driving record would show a gap in cover in terms of personal insurance. So there’s a need to reach out beyond traditional insurance data silos to capture these new types of events.
Listen to this video as Paul Stacy, our R&D Director and Director of Automotive Development for EMEA, talks about insurance in this unfolding scenario.
LexisNexis Risk Solutions, a unit of RELX Group, is a global data technology and advanced analytics leader, with customers in over 100 countries worldwide.